Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth depends on it. Regardless of the various methods used by elite investors like David Tepper and Dan Loeb, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is Xueda Education Group (ADR) (NYSE:XUE) a buy? Hedge funds are taking an optimistic view. The number of bullish hedge fund positions went up by 3 recently. Xueda Education Group was in 9 hedge funds’ portfolios at the end of the third quarter of 2015. There were 6 hedge funds in our database with Xueda Education Group holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Arlington Asset Investment Corp (NYSE:AI), Wausau Paper Corp. (NYSE:WPP), and Vimicro International Corporation (ADR) (NASDAQ:VIMC) to gather more data points.
If you’d ask most investors, hedge funds are assumed to be slow, outdated financial tools of years past. While there are greater than 8,000 funds in operation today, we look at the upper echelon of this group, around 700 funds. These investment experts preside over bulk of the smart money’s total asset base, and by tracking their finest picks, Insider Monkey has unsheathed various investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, let’s go over the key action encompassing Xueda Education Group (ADR) (NYSE:XUE).
What does the smart money think about Xueda Education Group (ADR) (NYSE:XUE)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 50% leap from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or had already accumulated large positions).
Of the funds tracked by Insider Monkey, Eric Semler’s TCS Capital Management has the most valuable position in Xueda Education Group (ADR) (NYSE:XUE), worth close to $15.5 million, corresponding to 12.6% of its total 13F portfolio. The second-largest stake is held by Granite Point Capital, led by Warren Lammert, holding a $1.8 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of Renaissance Technologies, Jim O’Brien and Jonathan Dorfman’s Napier Park Global Capital, and Rob Romero’s Connective Capital Management.
Now, key money managers were leading the bulls’ herd. Napier Park Global Capital assembled the most valuable position in Xueda Education Group (ADR) (NYSE:XUE). Napier Park Global Capital had $0.7 million invested in the company at the end of the quarter. Emanuel J. Friedman’s EJF Capital also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, and Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks similar to Xueda Education Group (ADR) (NYSE:XUE). These stocks are Arlington Asset Investment Corp (NYSE:AI), Wausau Paper Corp. (NYSE:WPP), Vimicro International Corporation (ADR) (NASDAQ:VIMC), and Build-A-Bear Workshop, Inc (NYSE:BBW). This group of stocks’ market valuations match Xueda Education Group’s market valuation.
|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 11 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $21 million in Xueda Education Group’s case. Wausau Paper Corp. (NYSE:WPP) is the most popular stock in this table. On the other hand Vimicro International Corporation (ADR) (NASDAQ:VIMC) is the least popular one with only 5 bullish hedge fund positions. Xueda Education Group (ADR) (NYSE:XUE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Wausau Paper might be a better candidate to consider for a long position.