Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Hailiang Education Group Inc. (NASDAQ:HLG) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Hedge fund interest in Hailiang Education Group Inc. (NASDAQ:HLG) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare HLG to other stocks including Rush Enterprises, Inc. (NASDAQ:RUSHA), Ballard Power Systems Inc. (NASDAQ:BLDP), and Edgewell Personal Care Company (NYSE:EPC) to get a better sense of its popularity.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Wall Street Bull
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the new hedge fund action surrounding Hailiang Education Group Inc. (NASDAQ:HLG).
How are hedge funds trading Hailiang Education Group Inc. (NASDAQ:HLG)?
At the end of the fourth quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HLG over the last 18 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Hailiang Education Group Inc. (NASDAQ:HLG) was held by Renaissance Technologies, which reported holding $7.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $0.3 million position. The only other hedge fund that is bullish on the company was Two Sigma Advisors.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hailiang Education Group Inc. (NASDAQ:HLG) but similarly valued. We will take a look at Rush Enterprises, Inc. (NASDAQ:RUSHA), Ballard Power Systems Inc. (NASDAQ:BLDP), Edgewell Personal Care Company (NYSE:EPC), and Park National Corporation (NYSE:PRK). This group of stocks’ market caps match HLG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RUSHA | 24 | 83111 | 3 |
| BLDP | 6 | 2731 | 0 |
| EPC | 26 | 233741 | 6 |
| PRK | 10 | 15018 | 1 |
| Average | 16.5 | 83650 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $8 million in HLG’s case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Ballard Power Systems Inc. (NASDAQ:BLDP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Hailiang Education Group Inc. (NASDAQ:HLG) is even less popular than BLDP. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on HLG, though not to the same extent, as the stock returned -13.1% during the same time period and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
