How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding K12 Inc. (NYSE:LRN).
Is K12 Inc. (NYSE:LRN) a buy, sell, or hold? Investors who are in the know were getting more bullish. The number of long hedge fund positions increased by 7 lately. K12 Inc. (NYSE:LRN) was in 21 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that LRN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now we’re going to check out the latest hedge fund action encompassing K12 Inc. (NYSE:LRN).
Do Hedge Funds Think LRN Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LRN over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ophir Asset Management held the most valuable stake in K12 Inc. (NYSE:LRN), which was worth $44.9 million at the end of the second quarter. On the second spot was Intrinsic Edge Capital which amassed $12.6 million worth of shares. Invenomic Capital Management, SG Capital Management, and Renaissance Technologies 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 Ophir Asset Management allocated the biggest weight to K12 Inc. (NYSE:LRN), around 7.89% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, earmarking 2.45 percent of its 13F equity portfolio to LRN.
Consequently, key hedge funds were leading the bulls’ herd. SG Capital Management, managed by Ken Grossman and Glen Schneider, initiated the most outsized position in K12 Inc. (NYSE:LRN). SG Capital Management had $8.9 million invested in the company at the end of the quarter. Ali Motamed’s Invenomic Capital Management also initiated a $3 million position during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Brandon Haley’s Holocene Advisors, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now take a look at hedge fund activity in other stocks similar to K12 Inc. (NYSE:LRN). We will take a look at Triumph Group Inc (NYSE:TGI), Alexander & Baldwin Inc (NYSE:ALEX), Celldex Therapeutics, Inc. (NASDAQ:CLDX), Seabridge Gold, Inc. (NYSE:SA), Knoll Inc (NYSE:KNL), The Shyft Group, Inc. (NASDAQ:SHYF), and Sapiens International Corporation N.V. (NASDAQ:SPNS). This group of stocks’ market values are closest to LRN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TGI | 22 | 201237 | 0 |
| ALEX | 14 | 61892 | -2 |
| CLDX | 22 | 421445 | -4 |
| SA | 11 | 120774 | 3 |
| KNL | 21 | 326522 | 11 |
| SHYF | 11 | 106618 | -2 |
| SPNS | 9 | 37662 | -3 |
| Average | 15.7 | 182307 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $106 million in LRN’s case. Triumph Group Inc (NYSE:TGI) is the most popular stock in this table. On the other hand Sapiens International Corporation N.V. (NASDAQ:SPNS) is the least popular one with only 9 bullish hedge fund positions. K12 Inc. (NYSE:LRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LRN is 82.4. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on LRN as the stock returned 3.9% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
