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Were Hedge Funds Right About Souring On Grand Canyon Education Inc (LOPE)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Grand Canyon Education Inc (NASDAQ:LOPE).

Grand Canyon Education Inc (NASDAQ:LOPE) was in 23 hedge funds’ portfolios at the end of June. LOPE has experienced a decrease in hedge fund sentiment in recent months. There were 26 hedge funds in our database with LOPE positions at the end of the previous quarter. Our calculations also showed that LOPE isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the latest hedge fund action surrounding Grand Canyon Education Inc (NASDAQ:LOPE).

How are hedge funds trading Grand Canyon Education Inc (NASDAQ:LOPE)?

Heading into the third quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in LOPE a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

No of Hedge Funds with LOPE Positions

The largest stake in Grand Canyon Education Inc (NASDAQ:LOPE) was held by Columbus Circle Investors, which reported holding $32.2 million worth of stock at the end of March. It was followed by Sabrepoint Capital with a $17 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and Renaissance Technologies.

Because Grand Canyon Education Inc (NASDAQ:LOPE) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that slashed their full holdings last quarter. Intriguingly, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital sold off the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at about $2.7 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also cut its call options, about $0.6 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Grand Canyon Education Inc (NASDAQ:LOPE). We will take a look at EPR Properties (NYSE:EPR), Wyndham Hotels & Resorts, Inc. (NYSE:WH), Millicom International Cellular S.A. (NASDAQ:TIGO), and Knight-Swift Transportation Holdings Inc. (NYSE:KNX). This group of stocks’ market valuations match LOPE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPR 20 171946 3
WH 40 878382 0
TIGO 5 119486 0
KNX 23 262916 -10
Average 22 358183 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $358 million. That figure was $122 million in LOPE’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 5 bullish hedge fund positions. Grand Canyon Education Inc (NASDAQ:LOPE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LOPE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LOPE were disappointed as the stock returned -16.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks (see the video below) among hedge funds as many of these stocks already outperformed the market so far this year.
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.

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