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Adtalem Global Education Inc. (ATGE): Are Hedge Funds Right About This Stock?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Adtalem Global Education Inc. (NYSE:ATGE).

Is Adtalem Global Education Inc. (NYSE:ATGE) a buy right now? The smart money is becoming more confident. The number of bullish hedge fund bets advanced by 2 lately. Our calculations also showed that ATGE isn’t among the 30 most popular stocks among hedge funds. ATGE was in 16 hedge funds’ portfolios at the end of the third quarter of 2018. There were 14 hedge funds in our database with ATGE holdings at the end of the previous quarter.

At the moment there are a large number of signals market participants use to size up their stock investments. A duo of the less utilized signals are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best money managers can outclass the S&P 500 by a solid amount (see the details here).

D. E. Shaw

We’re going to go over the new hedge fund action surrounding Adtalem Global Education Inc. (NYSE:ATGE).

How are hedge funds trading Adtalem Global Education Inc. (NYSE:ATGE)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the second quarter of 2018. On the other hand, there were a total of 20 hedge funds with a bullish position in ATGE at the beginning of this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ATGE_dec2018

The largest stake in Adtalem Global Education Inc. (NYSE:ATGE) was held by AQR Capital Management, which reported holding $57.3 million worth of stock at the end of September. It was followed by Ariel Investments with a $57.1 million position. Other investors bullish on the company included Newtyn Management, D E Shaw, and International Value Advisers.

Now, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, assembled the most valuable position in Adtalem Global Education Inc. (NYSE:ATGE). Millennium Management had $2.7 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.9 million position during the quarter. The other funds with brand new ATGE positions are Jim Simons’s Renaissance Technologies, Thomas Bailard’s Bailard Inc, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Adtalem Global Education Inc. (NYSE:ATGE). These stocks are Eventbrite, Inc. (NYSE:EB), Orbotech Ltd. (NASDAQ:ORBK), The RMR Group Inc. (NASDAQ:RMR), and WESCO International, Inc. (NYSE:WCC). This group of stocks’ market valuations are similar to ATGE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EB 20 592474 20
ORBK 27 587111 3
RMR 9 43789 -2
WCC 26 504839 0
Average 20.5 432053 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $432 million. That figure was $210 million in ATGE’s case. Orbotech Ltd. (NASDAQ:ORBK) is the most popular stock in this table. On the other hand The RMR Group Inc. (NASDAQ:RMR) is the least popular one with only 9 bullish hedge fund positions. Adtalem Global Education Inc. (NYSE:ATGE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ORBK might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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