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Did Hedge Funds Drop The Ball On Aspen Group Inc. (ASPU) ?

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 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority 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’ consensus 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 Aspen Group Inc. (NASDAQ:ASPU).

Aspen Group Inc. (NASDAQ:ASPU) has experienced a decrease in hedge fund sentiment lately. ASPU was in 3 hedge funds’ portfolios at the end of September. There were 4 hedge funds in our database with ASPU holdings at the end of the previous quarter. Our calculations also showed that ASPU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are viewed as unimportant, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open today, We choose to focus on the moguls of this club, approximately 750 funds. These hedge fund managers administer the majority of the smart money’s total capital, and by tracking their first-class equity investments, Insider Monkey has come up with many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

OMEGA ADVISORS

Leon Cooperman of Omega Advisors

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s analyze the new hedge fund action surrounding Aspen Group Inc. (NASDAQ:ASPU).

What does smart money think about Aspen Group Inc. (NASDAQ:ASPU)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in ASPU a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Aspen Group Inc. (NASDAQ:ASPU) was held by Omega Advisors, which reported holding $5.2 million worth of stock at the end of September. It was followed by P.A.W. Capital Partners with a $1.6 million position. The only other hedge fund that is bullish on the company was Royce & Associates.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Potrero Capital Research. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified ASPU as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks similar to Aspen Group Inc. (NASDAQ:ASPU). These stocks are International Tower Hill Mines Ltd. (NYSE:THM), Carolina Trust BancShares, Inc. (NASDAQ:CART), Ur-Energy Inc. (NYSE:URG), and China XD Plastics Company Limited (NASDAQ:CXDC). This group of stocks’ market values are closest to ASPU’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
THM 4 35155 -1
CART 5 6371 4
URG 1 3204 -2
CXDC 1 1227 -1
Average 2.75 11489 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $7 million in ASPU’s case. Carolina Trust BancShares, Inc. (NASDAQ:CART) is the most popular stock in this table. On the other hand Ur-Energy Inc. (NYSE:URG) is the least popular one with only 1 bullish hedge fund positions. Aspen Group Inc. (NASDAQ:ASPU) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ASPU as the stock returned 36.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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