The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Career Education Corp. (NASDAQ:CECO), and what that likely means for the prospects of the company and its stock.
Is Career Education Corp. (NASDAQ:CECO) an excellent investment today? The best stock pickers are in a bearish mood. The number of long hedge fund positions retreated by 3 in recent months. CECO was in 13 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with CECO 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 Global Ship Lease, Inc. (NYSE:GSL), Agilysys, Inc. (NASDAQ:AGYS), and BankFinancial Corporation (NASDAQ:BFIN) to gather more data points.
In today’s marketplace there are plenty of indicators stock traders can use to analyze their holdings. A couple of the most under-the-radar indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best investment managers can outclass their index-focused peers by a superb margin (see the details here).
With all of this in mind, we’re going to take a glance at the key action encompassing Career Education Corp. (NASDAQ:CECO).
Hedge fund activity in Career Education Corp. (NASDAQ:CECO)
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 19% from one quarter earlier. 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 holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Nathaniel August’s Mangrove Partners has the largest position in Career Education Corp. (NASDAQ:CECO), worth close to $12.3 million, corresponding to 2.8% of its total 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding an $8.2 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions include Michael Kao’s Akanthos Capital, Richard Blum’s Blum Capital Partners and Eric Semler’s TCS Capital Management.
Seeing as Career Education Corp. (NASDAQ:CECO) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, David Brown’s Hawk Ridge Management cut the biggest position of all the hedgies monitored by Insider Monkey, worth close to $1.6 million. Peter Muller’s fund, PDT Partners, also dropped its stock, about $0.5 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Career Education Corp. (NASDAQ:CECO). We will take a look at Global Ship Lease, Inc. (NYSE:GSL), Agilysys, Inc. (NASDAQ:AGYS), BankFinancial Corporation (NASDAQ:BFIN), and Real Industry Inc (NASDAQ:RELY). This group of stocks’ market values resemble CECO’s market value.
|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 8 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $48 million in CECO’s case. Agilysys, Inc. (NASDAQ:AGYS) is the most popular stock in this table. While BankFinancial Corporation (NASDAQ:BFIN) is the least popular stock with only 4 bullish hedge fund positions, Agilysys, Inc. (NASDAQ:AGYS) and Career Education Corp. (NASDAQ:CECO) are leading the pack with 13 long positions. Since AGYS has attracted a higher amount of hedge fund capital, we believe it might be a better candidate to consider a long position.