Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Capella Education Company (NASDAQ:CPLA) a marvelous investment today? Investors who are in the know are indeed becoming less hopeful. The number of bullish hedge fund bets went down by 2 lately. There were 15 hedge funds in our database with CPLA holdings at the end of the third quarter. At the end of this article we will also compare CPLA to other stocks including LHC Group, Inc. (NASDAQ:LHCG), ePlus Inc. (NASDAQ:PLUS), and Easterly Government Properties Inc (NYSE:DEA) to get a better sense of its popularity.
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.
Keeping this in mind, we’re going to take a gander at the latest action encompassing Capella Education Company (NASDAQ:CPLA).
How have hedgies been trading Capella Education Company (NASDAQ:CPLA)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 12% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in CPLA over the last 5 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Capella Education Company (NASDAQ:CPLA), worth close to $59.7 million. The second most bullish fund manager is Jim Simons’ Renaissance Technologies holding a $55.7 million position. Other members of the smart money that are bullish encompass Cliff Asness’ AQR Capital Management, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors. 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.
Due to the fact that Capella Education Company (NASDAQ:CPLA) has witnessed bearish sentiment from the smart money, logic holds that there is a sect of funds that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Thomas Bancroft’s Makaira Partners cut the largest stake of the 700 funds studied by Insider Monkey, worth about $15.5 million in stock, and Joshua Packwood and Schuster Tanger’s Radix Partners was right behind this move, as the fund dropped about $0.4 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Capella Education Company (NASDAQ:CPLA) but similarly valued. We will take a look at LHC Group, Inc. (NASDAQ:LHCG), ePlus Inc. (NASDAQ:PLUS), Easterly Government Properties Inc (NYSE:DEA), and Enviva Partners LP (NYSE:EVA). This group of stocks’ market values resemble CPLA’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 9 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $139 million in CPLA’s case. LHC Group, Inc. (NASDAQ:LHCG) is the most popular stock in this table. On the other hand Enviva Partners LP (NYSE:EVA) is the least popular one with only 2 bullish hedge fund positions. Capella Education Company (NASDAQ:CPLA) 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 LHCG might be a better candidate to consider taking a long position in.