Is New Oriental Education & Tech Grp (ADR) (NYSE:EDU) a healthy stock for your portfolio? Prominent investors are taking a pessimistic view. The number of bullish hedge fund bets decreased by 6 recently.
To most investors, hedge funds are perceived as unimportant, old financial tools of the past. While there are greater than 8000 funds trading at the moment, we at Insider Monkey look at the masters of this club, close to 450 funds. It is estimated that this group controls the lion’s share of all hedge funds’ total capital, and by keeping an eye on their highest performing picks, we have found a few investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).
Just as key, bullish insider trading activity is another way to parse down the financial markets. Obviously, there are lots of reasons for an insider to get rid of shares of his or her company, but only one, very obvious reason why they would behave bullishly. Many academic studies have demonstrated the impressive potential of this tactic if “monkeys” understand what to do (learn more here).
With all of this in mind, let’s take a look at the recent action surrounding New Oriental Education & Tech Grp (ADR) (NYSE:EDU).
What does the smart money think about New Oriental Education & Tech Grp (ADR) (NYSE:EDU)?
In preparation for this year, a total of 7 of the hedge funds we track were bullish in this stock, a change of -46% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably.
Of the funds we track, Brookside Capital, managed by Bain Capital, holds the largest position in New Oriental Education & Tech Grp (ADR) (NYSE:EDU). Brookside Capital has a $101 million position in the stock, comprising 2.3% of its 13F portfolio. The second largest stake is held by Joho Capital, managed by Robert Karr, which held a $37.5 million position; the fund has 5% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Hugh Sloane’s Sloane Robinson Investment Management, Ken Griffin’s Citadel Investment Group and Richard Driehaus’s Driehaus Capital.
Seeing as New Oriental Education & Tech Grp (ADR) (NYSE:EDU) has witnessed a declination in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds that decided to sell off their entire stakes heading into 2013. It’s worth mentioning that Rob Citrone’s Discovery Capital Management dumped the largest stake of the 450+ funds we monitor, comprising close to $48.6 million in stock., and John Thaler of JAT Capital Management was right behind this move, as the fund sold off about $18 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 6 funds heading into 2013.
What do corporate executives and insiders think about New Oriental Education & Tech Grp (ADR) (NYSE:EDU)?
Insider purchases made by high-level executives is particularly usable when the company in focus has experienced transactions within the past half-year. Over the latest 180-day time period, New Oriental Education & Tech Grp (ADR) (NYSE:EDU) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to New Oriental Education & Tech Grp (ADR) (NYSE:EDU). These stocks are Education Management Corp (NASDAQ:EDMC), K12 Inc. (NYSE:LRN), Strayer Education Inc (NASDAQ:STRA), Bridgepoint Education Inc (NYSE:BPI), and TAL Education Group (ADR) (NYSE:XRS). This group of stocks are in the education & training services industry and their market caps are similar to EDU’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Education Management Corp (NASDAQ:EDMC) | 6 | 1 | 0 |
| K12 Inc. (NYSE:LRN) | 3 | 0 | 2 |
| Strayer Education Inc (NASDAQ:STRA) | 7 | 2 | 5 |
| Bridgepoint Education Inc (NYSE:BPI) | 11 | 0 | 0 |
| TAL Education Group (ADR) (NYSE:XRS) | 5 | 0 | 0 |
With the returns shown by Insider Monkey’s studies, retail investors should always monitor hedge fund and insider trading sentiment, and New Oriental Education & Tech Grp (ADR) (NYSE:EDU) applies perfectly to this mantra.
