Buying by hedge funds like FengHe and Baupost sparks 380 per cent rally for hard-hit Chinese education stock
- Hedge funds have gone big on New Oriental, accounting for some 36 per cent of the publicly disclosed ADRs in December, up from less than 5.6 per cent in October 2021
- New Oriental lost about 96 per cent of its value along with other education-technology stocks after Beijing clamped on after-school tutoring services
A battered Chinese education stock became a hedge fund investment darling, soaring 380 per cent since its March-low.
New Oriental Education & Technology Group could see another 50 per cent upside in price in the next 12 months, according to a January newsletter by Singapore-based FengHe Fund Management, one of several hedge funds that bought into the company’s US-traded shares.
Hedge funds now have become one of the biggest investor groups of New Oriental – some 36 per cent of publicly disclosed American depository receipts of the company were controlled by such investors in December, up from less than 5.6 per cent in October 2021, according to data compiled by Bloomberg. The hedge funds were initially attracted by the cheap valuation, and bet on the Beijing-based company’s ability to win market share and pricing power after smaller competitors retreated.
Seth Klarman’s Baupost Group also bought the company’s stock last year, joining FengHe as top holders of New Oriental at year-end, the data showed.
When Beijing clamped down on after-school tutoring services, New Oriental lost about 96 per cent of its value amid the broader decimation of publicly traded education-technology stocks.
