Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is 2U Inc (NASDAQ:TWOU) going to take off soon? Money managers are turning bullish. The number of long hedge fund bets that are revealed through the 13F filings moved up by 3 recently. There were 12 hedge funds in our database with TWOU holdings at the end of the previous quarter. At the end of this article we will also compare TWOU to other stocks including Fidelity & Guaranty Life (NYSE:FGL), Amkor Technology, Inc. (NASDAQ:AMKR), and La-Z-Boy Incorporated (NYSE:LZB) to get a better sense of its popularity.
Follow 2U Inc. (NASDAQ:TWOU)
Follow 2U Inc. (NASDAQ:TWOU)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to review the recent action encompassing 2U Inc (NASDAQ:TWOU).
How have hedgies been trading 2U Inc (NASDAQ:TWOU)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter of 2016. By comparison, 12 hedge funds held shares or bullish call options in TWOU heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Columbus Circle Investors has the most valuable position in 2U Inc (NASDAQ:TWOU), worth close to $29.6 million, comprising 0.3% of its total 13F portfolio. On Columbus Circle Investors’s heels is quant hedge fundD E Shaw, with a $12.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions encompass Chuck Royce’s Royce & Associates, Matthew A. Weatherbie’s Weatherbie Capital and Drew Cupps’s Cupps Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Diker Management, led by Mark N. Diker, initiated the most valuable position in 2U Inc (NASDAQ:TWOU). Diker Management had $1.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new TWOU investors: John Overdeck and David Siegel’s Two Sigma Advisors and Frank Slattery’s Symmetry Peak Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as 2U Inc (NASDAQ:TWOU) but similarly valued. These stocks are Fidelity & Guaranty Life (NYSE:FGL), Amkor Technology, Inc. (NASDAQ:AMKR), La-Z-Boy Incorporated (NYSE:LZB), and Renasant Corp. (NASDAQ:RNST). All of these stocks’ market caps are closest to TWOU’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FGL | 12 | 107192 | 0 |
| AMKR | 20 | 123399 | 4 |
| LZB | 18 | 64304 | -1 |
| RNST | 9 | 38642 | -2 |
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $71 million in TWOU’s case. Amkor Technology, Inc. (NASDAQ:AMKR) is the most popular stock in this table. On the other hand Renasant Corp. (NASDAQ:RNST) is the least popular one with only 9 bullish hedge fund positions. 2U Inc (NASDAQ:TWOU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AMKR might be a better candidate to consider taking a long position in.
