In this article we will take a look at whether hedge funds think New Oriental Education & Technology Group Inc. (NYSE:EDU) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is New Oriental Education & Technology Group Inc. (NYSE:EDU) going to take off soon? Investors who are in the know are becoming less confident. The number of long hedge fund bets decreased by 8 recently. Our calculations also showed that EDU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). EDU was in 42 hedge funds’ portfolios at the end of the first quarter of 2020. There were 50 hedge funds in our database with EDU holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most market participants, hedge funds are perceived as worthless, old financial vehicles of the past. While there are greater than 8000 funds in operation at present, We hone in on the bigwigs of this group, approximately 850 funds. These hedge fund managers oversee the lion’s share of all hedge funds’ total capital, and by watching their matchless stock picks, Insider Monkey has figured out numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Stanley Druckenmiller of Duquesne Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the 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 analyze the key hedge fund action regarding New Oriental Education & Technology Group Inc. (NYSE:EDU).
How are hedge funds trading New Oriental Education & Technology Group Inc. (NYSE:EDU)?
Heading into the second quarter of 2020, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the fourth quarter of 2019. By comparison, 28 hedge funds held shares or bullish call options in EDU a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in New Oriental Education & Technology Group Inc. (NYSE:EDU) was held by Melvin Capital Management, which reported holding $285.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $253.4 million position. Other investors bullish on the company included Tiger Global Management LLC, Alkeon Capital Management, and GQG Partners. In terms of the portfolio weights assigned to each position Kylin Management allocated the biggest weight to New Oriental Education & Technology Group Inc. (NYSE:EDU), around 18.1% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, earmarking 8.71 percent of its 13F equity portfolio to EDU.
Seeing as New Oriental Education & Technology Group Inc. (NYSE:EDU) has faced falling interest from the smart money, we can see that there exists a select few hedge funds who were dropping their full holdings last quarter. Interestingly, Lei Zhang’s Hillhouse Capital Management cut the largest stake of all the hedgies watched by Insider Monkey, totaling about $73.1 million in stock. Rob Citrone’s fund, Discovery Capital Management, also dropped its stock, about $10.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 8 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to New Oriental Education & Technology Group Inc. (NYSE:EDU). We will take a look at Coca-Cola European Partners plc (NYSE:CCEP), Snap Inc. (NYSE:SNAP), Tencent Music Entertainment Group (NYSE:TME), and Simon Property Group, Inc (NYSE:SPG). This group of stocks’ market caps are similar to EDU’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCEP,22,185913,1 SNAP,48,929814,-18 TME,25,455610,-1 SPG,29,419445,3 Average,31,497696,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $498 million. That figure was $1555 million in EDU’s case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Coca-Cola European Partners plc (NYSE:CCEP) is the least popular one with only 22 bullish hedge fund positions. New Oriental Education & Technology Group Inc. (NYSE:EDU) 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately EDU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EDU were disappointed as the stock returned 10.8% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.