Polen Capital: “New Oriental (EDU) Remains Poised to Grow Earnings at 25% Annual Rate”

Polen Capital, an investment management firm, published its “Polen International Growth” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of -1.14% was delivered by the fund for the Q1 of 2021, trailing its MSCI All Country World benchmark that delivered a 3.49% return for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Polen International Growth Fund, in its Q1 2021 investor letter, mentioned New Oriental Education & Technology Group Inc. (NYSE: EDU), and shared their insights on the company. New Oriental Education & Technology Group Inc. is a Haidian District, Beijing, China-based private educational services provider that currently has a $23.3 billion market capitalization. Since the beginning of the year, EDU delivered a -34.34% return, while its 12-month gains are up by 3.76%. As of May 14, 2021, the stock closed at $12.20 per share.

Here is what Polen International Growth Fund has to say about New Oriental Education & Technology Group Inc. in its Q1 2021 investor letter:

New Oriental Education shares declined in the quarter, seemingly on account of two notable drivers. First, Chinese online education is currently under a regulatory microscope, although the online tutoring area is not central to New Oriental’s business. We continue to believe that, as a large player in a highly fragmented market, New Oriental is well-positioned to manage regulatory change and offers regulators an easier touchpoint to regulate and monitor than individual mom & pop operators.

As regulatory fears hit the after-school tutoring market, we think New Oriental, a leading player in brick-and-mortar after-school tutoring, could gain strength. We think the long-term backdrop for after-school tutoring remains quite favorable. Significant scale advantages and a highly cash generative model with just approximately 5% market share indicate that New Oriental has potential to grow at a high rate, in our opinion. Further, movements by another investor in New Oriental in late March 2021 prompted indiscriminate selling of shares. Those sales left shares trading at a compelling valuation, in our opinion, so we acted by adding to our position. We think New Oriental remains poised to grow earnings at approximately 25% annual rate in the coming years.”

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Our calculations show that New Oriental Education & Technology Group Inc. (NYSE: EDU) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, New Oriental Education & Technology Group Inc. was in 43 hedge fund portfolios, compared to 40 funds in the third quarter. EDU delivered a -37.71% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.