Were Hedge Funds Right About OneSmart International Education Group Limited (ONE)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article, we are going to look at what hedge funds think of OneSmart International Education Group Limited (NYSE:ONE).

Hedge fund interest in OneSmart International Education Group Limited (NYSE:ONE) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Meridian Bancorp, Inc. (NASDAQ:EBSB), HeadHunter Group PLC (NASDAQ:HHR), and TiVo Corporation (NASDAQ:TIVO) to gather more data points. Our calculations also showed that ONE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

To the average investor there are a multitude of gauges stock traders can use to size up publicly traded companies. A pair of the less known gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top fund managers can outpace the market by a very impressive amount (see the details here).

Chase Coleman of Tiger Global

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the key hedge fund action encompassing OneSmart International Education Group Limited (NYSE:ONE).

How have hedgies been trading OneSmart International Education Group Limited (NYSE:ONE)?

At Q4’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in ONE a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Among these funds, Yiheng Capital held the most valuable stake in OneSmart International Education Group Limited (NYSE:ONE), which was worth $49.4 million at the end of the third quarter. On the second spot was Indus Capital which amassed $9.6 million worth of shares. Old Well Partners, Renaissance Technologies, and Tiger Global Management LLC 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 Old Well Partners allocated the biggest weight to OneSmart International Education Group Limited (NYSE:ONE), around 4.82% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, designating 4.33 percent of its 13F equity portfolio to ONE.

Since OneSmart International Education Group Limited (NYSE:ONE) has experienced declining sentiment from hedge fund managers, we can see that there was a specific group of hedge funds that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group sold off the largest stake of the 750 funds monitored by Insider Monkey, comprising about $0.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $0.1 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to OneSmart International Education Group Limited (NYSE:ONE). We will take a look at Meridian Bancorp, Inc. (NASDAQ:EBSB), HeadHunter Group PLC (NASDAQ:HHR), TiVo Corporation (NASDAQ:TIVO), and QEP Resources Inc (NYSE:QEP). This group of stocks’ market values match ONE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EBSB 12 94607 1
HHR 6 62887 -2
TIVO 26 102564 3
QEP 23 194024 2
Average 16.75 113521 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $71 million in ONE’s case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand HeadHunter Group PLC (NASDAQ:HHR) is the least popular one with only 6 bullish hedge fund positions. OneSmart International Education Group Limited (NYSE:ONE) 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. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately ONE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ONE investors were disappointed as the stock returned -27.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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