Should You Avoid Corinthian Colleges Inc (COCO)?

Corinthian Colleges Inc (NASDAQ:COCO) was in 17 hedge funds’ portfolio at the end of the first quarter of 2013. COCO has experienced a decrease in hedge fund sentiment in recent months. There were 19 hedge funds in our database with COCO holdings at the end of the previous quarter.

Corinthian Colleges Inc (NASDAQ:COCO)

In the eyes of most traders, hedge funds are viewed as underperforming, old investment vehicles of years past. While there are over 8000 funds trading today, we look at the top tier of this club, about 450 funds. Most estimates calculate that this group controls most of the hedge fund industry’s total asset base, and by tracking their top investments, we have uncovered a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as beneficial, positive insider trading activity is another way to break down the marketplace. As the old adage goes: there are plenty of incentives for an upper level exec to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this strategy if investors know where to look (learn more here).

Now, it’s important to take a glance at the key action regarding Corinthian Colleges Inc (NASDAQ:COCO).

How are hedge funds trading Corinthian Colleges Inc (NASDAQ:COCO)?

Heading into Q2, a total of 17 of the hedge funds we track were long in this stock, a change of -11% from the first quarter. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly.

According to our comprehensive database, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Corinthian Colleges Inc (NASDAQ:COCO). Royce & Associates has a $8.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which held a $8.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedgies that are bullish include Lisa Rapuano’s Lane Five Capital, Robert Pitts’s Steadfast Capital Management and Himanshu H. Shah’s Shah Capital Management.

Seeing as Corinthian Colleges Inc (NASDAQ:COCO) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that decided to sell off their entire stakes last quarter. Interestingly, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management dropped the biggest position of the 450+ funds we watch, comprising about $0.4 million in call options, and Jim Simons of Renaissance Technologies was right behind this move, as the fund cut about $0.4 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds last quarter.

What have insiders been doing with Corinthian Colleges Inc (NASDAQ:COCO)?

Bullish insider trading is at its handiest when the company we’re looking at has experienced transactions within the past half-year. Over the latest six-month time period, Corinthian Colleges Inc (NASDAQ:COCO) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Corinthian Colleges Inc (NASDAQ:COCO). These stocks are ChinaEdu Corporation (ADR) (NASDAQ:CEDU), Lincoln Educational Services Corporation (NASDAQ:LINC), Career Education Corp. (NASDAQ:CECO), Xueda Education Group (ADR) (NYSE:XUE), and China Distance Education Hldgs Ltd (ADR) (NYSE:DL). All of these stocks are in the education & training services industry and their market caps match COCO’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
ChinaEdu Corporation (ADR) (NASDAQ:CEDU) 1 0 0
Lincoln Educational Services Corporation (NASDAQ:LINC) 6 1 1
Career Education Corp. (NASDAQ:CECO) 14 1 1
Xueda Education Group (ADR) (NYSE:XUE) 4 0 0
China Distance Education Hldgs Ltd (ADR) (NYSE:DL) 1 0 0

With the results demonstrated by the aforementioned strategies, retail investors must always pay attention to hedge fund and insider trading activity, and Corinthian Colleges Inc (NASDAQ:COCO) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds