I was recently contacted by PAR Capital asking me to update their hedge fund page. Ed Shapiro is retired in 2016 and the fund is currently solely managed by Paul Reeder. Interestingly, PAR Capital managed to grow its 13F portfolio over the years, yet it didn’t attract my attention much. Our investment strategy focuses on the stock picks of the 100 best performing hedge funds. When I looked at our latest quarterly rankings, I saw PAR Capital at #330. PAR Capital’s 13F stock picks that have at least $1 billion in market cap lost an average of 1% during Q3 and underperformed the S&P 500 Index by nearly 3 percentage points.
Its 12-month performance (ending September 30th) isn’t encouraging either: a loss of 6%, mainly because of 18+% losses during the fourth quarter of 2018. So, I went back to our 2018 Q3 hedge fund rankings and saw a relatively better performance figures. The Boston-based hedge fund still didn’t make it to our top 100 list, but managed to place at #160 with a 12-month gain of 17.8% through September 30, 2018.
You should understand that these return figures only highlight the performance of PAR Capital’s long stock picks. We don’t know anything about its cash position, leverage, other non-equity positions, and we don’t deduct any performance fees. We only care about the long stock picking ability of hedge funds because they disclose their long stock picks once a quarter and this gives us the opportunity to piggyback the best hedge funds’ best stock picks. Our flagship strategy outperformed the Russell 2000 Index by nearly 40 percentage points since its inception 5.5 years ago. We also have a short strategy that performed phenomenally over the last 3 years. Our latest basket of short stock picks lost an average of 7% within one week of our recommendations (download a free sample issue).
Back to PAR Capital. Paul Reeder’s two biggest positions at the end of September was Expedia Group Inc. (NASDAQ:EXPE) and United Airlines Holdings, Inc. (NASDAQ:UAL). Reeder allocated a total of $2.5 billion to these two stocks, nearly 44% of its entire 13F portfolio. I love it when I see hedge funds making concentrated bets. Definitely Paul Reeder isn’t one of those slimy fund managers that secretly track index funds and still charge an arm and a leg for these stock picks. Unfortunately though, Expedia Group Inc shares suffered huge losses so far in Q4 along with other travel website stocks when Alphabet Inc’s (NASDAQ:GOOGL) changed its search algorith. Expedia went down 28%, TripAdvisor, Inc. (NASDAQ:TRIP) lost 18.7%, trivago N.V. (NASDAQ:TRVG) lost 40%, and Booking Holdings Inc. (NASDAQ:BKNG) was down 4.3%. Paul Reeder had positions in all of these stocks except Alphabet Inc.
By the way, other hedge funds went the opposite way in recent years. Expedia’s hedge fund sentiment was cut in half since 2017, and Alphabet Inc. consistently found a place among the top 5 stocks among the 750 hedge funds tracked by Insider Monkey. Alphabet Inc’s GOOGL stock ranked 5th overall and returned around 6% so far during Q4. The top 20 stocks among hedge funds delivered a total gain of 34.7% so far in 2019 and outperformed the market by 8.5 percentage points. So, we can confidently say that hedge funds’ top stock picks still beat the market by a large margin. On the other hand Paul Reeder’s 50+ stock 13F portfolio underperformed the market by 7 percentage points so far in Q4.
Disclosure: None. This article is originally published at Insider Monkey.