Should You Add Career Education Corp. (CECO) to Your Portfolio?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Career Education Corp. (NASDAQ:CECO) from the perspective of those successful funds.

Career Education Corp. (NASDAQ:CECO) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. At the end of September, 16 funds tracked by Insider Monkey held shares of Career Education Corp, which represents a jump of nine funds from the end of June. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cascade Bancorp (NASDAQ:CACB), Forestar Group Inc. (NYSE:FOR), and Ashford Hospitality Prime Inc (NYSE:AHP) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s take a glance at the latest action regarding Career Education Corp. (NASDAQ:CECO).

What have hedge funds been doing with Career Education Corp. (NASDAQ:CECO)?

During the third quarter, the number of funds followed by us long Career Education Corp. advanced by 78% to 16.  Below, you can check out the change in hedge fund sentiment towards CECO over the last five quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’ Renaissance Technologies holds the largest position in Career Education Corp. (NASDAQ:CECO). Renaissance Technologies has a $26.6 million position in the stock. The second most bullish fund manager is Nathaniel August’s Mangrove Partners which holds a $18.1 million position; 4.2% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism consist of Michael Kao’s Akanthos Capital, Cliff Asness’ AQR Capital Management, and David E. Shaw’s D E Shaw. We should note that Mangrove Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, key money managers were leading the bulls’ herd. Israel Englander’s Millennium Management initiated the biggest position in Career Education Corp. (NASDAQ:CECO). Millennium Management had $0.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.5 million investment in the stock during the quarter. The other funds with brand new CECO positions are John Overdeck and David Siegel’s Two Sigma Advisors, Neil Chriss’ Hutchin Hill Capital, and Joel Greenblatt’s Gotham Asset Management.

Let’s go over hedge fund activity in other stocks similar to Career Education Corp. (NASDAQ:CECO). These stocks are Cascade Bancorp (NASDAQ:CACB), Forestar Group Inc. (NYSE:FOR), Ashford Hospitality Prime Inc (NYSE:AHP), and World Acceptance Corp. (NASDAQ:WRLD). This group of stocks’ market caps are similar to CECO’s market cap.

As you can see these stocks had an average of 12 funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $62 million in CECO’s case. Forestar Group Inc. (NYSE:FOR) is the most popular stock in this table. On the other hand Cascade Bancorp (NASDAQ:CACB) is the least popular one with only nine investors having reported long positions. Compared to these stocks Career Education Corp. (NASDAQ:CECO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None