Do Hedge Funds Love Laureate Education, Inc. (LAUR)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Laureate Education, Inc. (NASDAQ:LAUR).

Laureate Education, Inc. (NASDAQ:LAUR) investors should pay attention to a decrease in enthusiasm from smart money recently. Laureate Education, Inc. (NASDAQ:LAUR) was in 21 hedge funds’ portfolios at the end of March. The all time high for this statistic is 34. Our calculations also showed that LAUR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Louis Bacon Moore of Moore Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a peek at the recent hedge fund action surrounding Laureate Education, Inc. (NASDAQ:LAUR).

Do Hedge Funds Think LAUR Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in LAUR a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is LAUR A Good Stock To Buy?

Among these funds, Moore Global Investments held the most valuable stake in Laureate Education, Inc. (NASDAQ:LAUR), which was worth $35.8 million at the end of the fourth quarter. On the second spot was Redwood Capital Management which amassed $35.7 million worth of shares. Nut Tree Capital, Park West Asset Management, and Maple Rock 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 Nut Tree Capital allocated the biggest weight to Laureate Education, Inc. (NASDAQ:LAUR), around 5.66% of its 13F portfolio. Ararat Capital is also relatively very bullish on the stock, setting aside 4.37 percent of its 13F equity portfolio to LAUR.

Since Laureate Education, Inc. (NASDAQ:LAUR) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers who were dropping their entire stakes heading into Q2. It’s worth mentioning that David Rosen’s Rubric Capital Management sold off the biggest position of the 750 funds watched by Insider Monkey, worth about $24.1 million in stock, and Noah Levy and Eugene Dozortsev’s Newtyn Management was right behind this move, as the fund cut about $13.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 7 funds heading into Q2.

Let’s also examine hedge fund activity in other stocks similar to Laureate Education, Inc. (NASDAQ:LAUR). We will take a look at Albany International Corp. (NYSE:AIN), FirstCash, Inc. (NASDAQ:FCFS), Sunstone Hotel Investors Inc (NYSE:SHO), Nu Skin Enterprises, Inc. (NYSE:NUS), Sanmina Corporation (NASDAQ:SANM), Rush Enterprises, Inc. (NASDAQ:RUSHA), and Harmony Gold Mining Co. (NYSE:HMY). All of these stocks’ market caps resemble LAUR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIN 12 22018 -1
FCFS 13 100364 -4
SHO 17 121727 1
NUS 19 327670 -3
SANM 16 156709 -3
RUSHA 17 78465 0
HMY 8 93178 -2
Average 14.6 128590 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $184 million in LAUR’s case. Nu Skin Enterprises, Inc. (NYSE:NUS) is the most popular stock in this table. On the other hand Harmony Gold Mining Co. (NYSE:HMY) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Laureate Education, Inc. (NASDAQ:LAUR) is more popular among hedge funds. Our overall hedge fund sentiment score for LAUR is 66.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately LAUR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LAUR were disappointed as the stock returned 6.5% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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