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Did Hedge Funds Make The Right Call On TAL Education Group (TAL) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of TAL Education Group (NYSE:TAL) based on that data and determine whether they were really smart about the stock.

TAL Education Group (NYSE:TAL) was in 38 hedge funds’ portfolios at the end of March. TAL investors should be aware of an increase in support from the world’s most elite money managers recently. There were 30 hedge funds in our database with TAL holdings at the end of the previous quarter. Our calculations also showed that TAL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are perceived as slow, old investment tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our researchers look at the top tier of this group, around 850 funds. These hedge fund managers direct the majority of the hedge fund industry’s total capital, and by keeping track of their top investments, Insider Monkey has come up with numerous investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Glen Kacher of Light Street Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to take a gander at the recent hedge fund action encompassing TAL Education Group (NYSE:TAL).

How have hedgies been trading TAL Education Group (NYSE:TAL)?

Heading into the second quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TAL over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is TAL A Good Stock To Buy?

Among these funds, Hillhouse Capital Management held the most valuable stake in TAL Education Group (NYSE:TAL), which was worth $399.7 million at the end of the third quarter. On the second spot was Tiger Global Management LLC which amassed $306.9 million worth of shares. Yiheng Capital, Tybourne Capital Management, and Tairen Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Serenity Capital allocated the biggest weight to TAL Education Group (NYSE:TAL), around 31.32% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, designating 19.79 percent of its 13F equity portfolio to TAL.

Now, key hedge funds were leading the bulls’ herd. Renaissance Technologies, assembled the most outsized position in TAL Education Group (NYSE:TAL). Renaissance Technologies had $32 million invested in the company at the end of the quarter. Glen Kacher’s Light Street Capital also initiated a $23.2 million position during the quarter. The following funds were also among the new TAL investors: Hyder Ahmad’s Broad Peak Investment Holdings, Stanley Druckenmiller’s Duquesne Capital, and Brandon Haley’s Holocene Advisors.

Let’s check out hedge fund activity in other stocks similar to TAL Education Group (NYSE:TAL). We will take a look at Ross Stores, Inc. (NASDAQ:ROST), HCA Healthcare Inc (NYSE:HCA), SBA Communications Corporation (NASDAQ:SBAC), and Monster Beverage Corp (NASDAQ:MNST). This group of stocks’ market caps are similar to TAL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROST 49 982341 1
HCA 87 2171218 24
SBAC 46 1835315 1
MNST 43 1843978 -2
Average 56.25 1708213 6

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.25 hedge funds with bullish positions and the average amount invested in these stocks was $1708 million. That figure was $1801 million in TAL’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Monster Beverage Corp (NASDAQ:MNST) is the least popular one with only 43 bullish hedge fund positions. Compared to these stocks TAL Education Group (NYSE:TAL) is even less popular than MNST. Hedge funds clearly dropped the ball on TAL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on TAL as the stock returned 28.4% in the second quarter and outperformed the market by an even larger margin.

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