Apollo Education Group Inc (NASDAQ:APOL), Nobilis Health Corp (NYSEMKT:HLTH), Clean Energy Fuels Corp (NASDAQ:CLNE), and Stone Energy Corporation (NYSE:SGY) are down for various reasons in trading today. Let’s take a closer look at the four stocks and why they’re dipping and examine hedge fund sentiment towards them to see if they make for good investment opportunities at their reduced prices. At the end, we will reveal the smart money’s top pick among the four in-the-red stocks.
Apollo Education Group Inc (NASDAQ:APOL) can’t seem to catch a break, as the Department of Defense put Apollo’s University of Phoenix on probationary status, citing “Compliance issues identified in July and August 2015 regarding the use of ‘challenge coins’ by University of Phoenix without receipt of the necessary trademark approvals, and the sponsoring by the University of various events at military installations without the specific written approval of the officer designated in the DoD MOU”, among other issues. Apollo Education is rectifying the issues, and notes that the DOD tuition assistance program accounts for less than 1% of University of Phoenix’s net sales. Investors are worried that Apollo might run into more regulatory scrutiny down the road, although if management resolves the issue, shares look attractive at a forward P/E of 15.5.
Hedge funds are bullish on Apollo Education Group Inc (NASDAQ:APOL). A total of 27 funds reported stakes worth $353.79 million (25.5% of the float) in the last round of 13F filings, up from 24 funds and $322.58 million respectively a quarter earlier. Larry Robbins‘ Glenview Capital increased its position by 41% to 7.58 million shares while Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC raised its stake by 87% to 6.5 million shares.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Nobilis Health Corp (NYSEMKT:HLTH) is down after Seeking Alpha published an article predicting 65% downside for the stock, citing substantial insider sales, questionable marketing practices, and recent auditor resignations. The author thinks management is promising too much and that the stock is overvalued. Our data shows hedge funds generally agree with the author, as only five elite funds in our database had long positions totaling 6.23 million shares or 1.4% of the company in June. 5.7% of the float is short.
Clean Energy Fuels Corp (NASDAQ:CLNE) and Stone Energy Corporation (NYSE:SGY) are down by 9.5% and 5.5% respectively after rallying substantially in recent weeks on the back of surging WTI prices. Although WTI hasn’t quite passed the $50 mark yet, some investors think it’s only a matter of time. If crude continues surging, the rally in the two energy stocks isn’t over. In the next page, we will analyze smart money’s sentiment towards Clean Energy and Stone Energy and reveal the smart money’s top pick among the four stocks in the red today.
Our data shows hedge funds are ambivalent on Clean Energy Fuels Corp (NASDAQ:CLNE). A total of 12 funds reported stakes worth $8.38 million (representing 1.70% of the float) in the latest round of 13F filings, versus six funds and $2.34 million respectively a quarter earlier. D E Shaw owns 481,197 shares.
Elite investors are divided on Stone Energy Corporation (NYSE:SGY) as well. 13 funds owned 11% of the float, or roughly $80.76 million worth of shares at the end of the second quarter, versus 13 funds with $95.79 million in shares in the first quarter. 19.43% of the float is short. Israel Englander‘s Millennium Management increased its position by 1% to 2.22 million shares, while Paul Reeder and Edward Shapiro’s PAR Capital Management cut its stake by 58% to 900,000 shares.
According to SEC filings, elite investors are the most bullish on Apollo Education of today’s four red stocks.