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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards RYB Education, Inc. (NYSE:RYB).
RYB Education, Inc. (NYSE:RYB) has experienced a decrease in hedge fund sentiment in recent months. RYB was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with RYB positions at the end of the previous quarter. Our calculations also showed that RYB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David E. Shaw of D.E. Shaw
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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. Keeping this in mind we’re going to check out the key hedge fund action surrounding RYB Education, Inc. (NYSE:RYB).
What have hedge funds been doing with RYB Education, Inc. (NYSE:RYB)?
At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RYB over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in RYB Education, Inc. (NYSE:RYB) was held by Yiheng Capital, which reported holding $4.4 million worth of stock at the end of September. It was followed by D E Shaw with a $1 million position. The only other hedge fund that is bullish on the company was Renaissance Technologies.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. 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 none of the 750+ hedge funds tracked by Insider Monkey identified RYB as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks similar to RYB Education, Inc. (NYSE:RYB). We will take a look at Chembio Diagnostics Inc (NASDAQ:CEMI), Waitr Holdings Inc. (NASDAQ:WTRH), Turtle Beach Corp (NASDAQ:HEAR), and Culp, Inc. (NYSE:CULP). All of these stocks’ market caps match RYB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CEMI | 4 | 13772 | 1 |
| WTRH | 7 | 7128 | -1 |
| HEAR | 10 | 4194 | -1 |
| CULP | 9 | 8619 | 1 |
| Average | 7.5 | 8428 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $6 million in RYB’s case. Turtle Beach Corp (NASDAQ:HEAR) is the most popular stock in this table. On the other hand Chembio Diagnostics Inc (NASDAQ:CEMI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks RYB Education, Inc. (NYSE:RYB) is even less popular than CEMI. Hedge funds dodged a bullet by taking a bearish stance towards RYB. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately RYB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); RYB investors were disappointed as the stock returned -20.2% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
