Is ITT Educational Services, Inc. (NYSE:ESI) a bargain? Hedge funds are getting less bullish. The number of bullish hedge fund bets were trimmed by 6 in recent months.
To most traders, hedge funds are seen as worthless, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation today, we choose to focus on the leaders of this group, around 450 funds. It is estimated that this group oversees most of the hedge fund industry’s total capital, and by tracking their highest performing equity investments, we have brought to light a few investment strategies that have historically beaten the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).
Equally as integral, positive insider trading sentiment is a second way to break down the marketplace. Just as you’d expect, there are lots of stimuli for an insider to downsize shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many academic studies have demonstrated the valuable potential of this tactic if “monkeys” understand where to look (learn more here).
Now, it’s important to take a peek at the latest action surrounding ITT Educational Services, Inc. (NYSE:ESI).
How are hedge funds trading ITT Educational Services, Inc. (NYSE:ESI)?
At Q1’s end, a total of 14 of the hedge funds we track were bullish in this stock, a change of -30% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly.
When looking at the hedgies we track, Select Equity Group, managed by Robert Joseph Caruso, holds the most valuable position in ITT Educational Services, Inc. (NYSE:ESI). Select Equity Group has a $54.6 million position in the stock, comprising 0.7% of its 13F portfolio. On Select Equity Group’s heels is Blum Capital Partners, managed by Richard Blum, which held a $45.4 million position; the fund has 6.9% of its 13F portfolio invested in the stock. Remaining hedgies that are bullish include Cliff Asness’s AQR Capital Management and Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management.
Because ITT Educational Services, Inc. (NYSE:ESI) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their entire stakes at the end of the first quarter. Intriguingly, Robert Pitts’s Steadfast Capital Management said goodbye to the largest investment of the “upper crust” of funds we monitor, worth an estimated $4.7 million in stock.. Eliav Assouline and Marc Andersen’s fund, Axial Capital, also sold off its stock, about $2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 6 funds at the end of the first quarter.
What have insiders been doing with ITT Educational Services, Inc. (NYSE:ESI)?
Bullish insider trading is at its handiest when the company in focus has experienced transactions within the past half-year. Over the last six-month time frame, ITT Educational Services, Inc. (NYSE:ESI) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to ITT Educational Services, Inc. (NYSE:ESI). These stocks are Education Management Corp (NASDAQ:EDMC), GP Strategies Corporation (NYSE:GPX), Franklin Covey Co. (NYSE:FC), Capella Education Company (NASDAQ:CPLA), and Universal Technical Institute, Inc. (NYSE:UTI). All of these stocks are in the education & training services industry and their market caps are closest to ESI’s market cap.