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Should You Avoid Aspen Group Inc. (ASPU)?

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. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Aspen Group Inc. (NASDAQ:ASPU).

Is Aspen Group Inc. (NASDAQ:ASPU) a buy right now? Prominent investors are turning less bullish. The number of bullish hedge fund bets were trimmed by 4 in recent months. Our calculations also showed that ASPU 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 58 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.

OMEGA ADVISORS

Leon Cooperman of Omega Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s analyze the fresh hedge fund action surrounding Aspen Group Inc. (NASDAQ:ASPU).

How are hedge funds trading Aspen Group Inc. (NASDAQ:ASPU)?

At Q1’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in ASPU a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Omega Advisors held the most valuable stake in Aspen Group Inc. (NASDAQ:ASPU), which was worth $4 million at the end of the third quarter. On the second spot was Driehaus Capital which amassed $2.6 million worth of shares. Royce & Associates, Millennium Management, and P.A.W. CAPITAL PARTNERS were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position P.A.W. CAPITAL PARTNERS allocated the biggest weight to Aspen Group Inc. (NASDAQ:ASPU), around 2.69% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, dishing out 0.52 percent of its 13F equity portfolio to ASPU.

Because Aspen Group Inc. (NASDAQ:ASPU) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers who sold off their entire stakes in the first quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest investment of all the hedgies watched by Insider Monkey, comprising about $0.3 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also sold off its stock, about $0.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to Aspen Group Inc. (NASDAQ:ASPU). We will take a look at Itamar Medical Ltd. (NASDAQ:ITMR), Casper Sleep Inc. (NYSE:CSPR), MEI Pharma Inc (NASDAQ:MEIP), and Northrim BanCorp, Inc. (NASDAQ:NRIM). This group of stocks’ market values are closest to ASPU’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ITMR 8 22287 5
CSPR 4 4295 4
MEIP 14 45986 -1
NRIM 9 20633 0
Average 8.75 23300 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $14 million in ASPU’s case. MEI Pharma Inc (NASDAQ:MEIP) is the most popular stock in this table. On the other hand Casper Sleep Inc. (NYSE:CSPR) is the least popular one with only 4 bullish hedge fund positions. Aspen Group Inc. (NASDAQ:ASPU) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on ASPU as the stock returned 28.4% during the second quarter and outperformed the market by an even larger margin.

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