Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
New Oriental Education & Tech Grp (ADR) (NYSE:EDU) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. EDU was in 15 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with EDU positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Elbit Systems Ltd. (USA) (NASDAQ:ESLT), Post Properties Inc (NYSE:PPS), and Air Lease Corp (NYSE:AL) to gather more data points.
In the 21st-century investor’s toolkit, there are many indicators market participants use to assess publicly traded companies. A couple of the best indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outpace the broader indices by a very impressive amount (see the details here).
Keeping this in mind, let’s view the new action encompassing New Oriental Education & Tech Grp (ADR) (NYSE:EDU).
What does the smart money think about New Oriental Education & Tech Grp (ADR) (NYSE:EDU)?
Heading into Q4, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Discovery Capital Management, managed by Rob Citrone, holds the most valuable position in New Oriental Education & Tech Grp (ADR) (NYSE:EDU). Discovery Capital Management has a $34.2 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Marianas Fund Management, managed by Will Snellings, which holds a $30.3 million call position; the fund has 6% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass William B. Gray’s Orbis Investment Management, Thomas E. Claugus’s GMT Capital and Jim Simons’s Renaissance Technologies.
Judging by the fact that New Oriental Education & Tech Grp (ADR) (NYSE:EDU) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who were dropping their entire stakes by the end of the third quarter. Interestingly, Ted Kang’s Kylin Management dumped the biggest stake of the 700 funds watched by Insider Monkey, totaling an estimated $40.3 million in stock. George Soros’s fund, Soros Fund Management, also said goodbye to its stock, about $31.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to New Oriental Education & Tech Grp (ADR) (NYSE:EDU). These stocks are Elbit Systems Ltd. (USA) (NASDAQ:ESLT), Post Properties Inc (NYSE:PPS), Air Lease Corp (NYSE:AL), and Brinker International, Inc. (NYSE:EAT). This group of stocks’ market caps are closest to EDU’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $168 million in EDU’s case. Air Lease Corp (NYSE:AL) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (USA) (NASDAQ:ESLT) is the least popular one with only 4 bullish hedge fund positions. New Oriental Education & Tech Grp (ADR) (NYSE:EDU) 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, AL might be a better candidate to consider a long position.