In an amended 13D filed with the SEC on July 27th, Daniel S. Och’s OZ Management has disclosed a 5.05% ownership stake in Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) of 8.63 million shares. According to the fund’s most recent 13F filing, OZ Management owned 2.44 million shares of common stock and call options underlying a further 2.39 million shares in the American hotel and leisure company. Therefore, the fund’s recently-updated ownership suggest that Och is still quite bullish on the company and sees a lot of potential for growth in it.
Och-Ziff Management, one of the largest institutional alternative asset management firms in the world, was established by Daniel S. Och in 1994. The New York-based firm has roughly $46.8 billion in assets under management as of July 1, 2015. The investment management firm currently manages multi-strategy funds, credit funds, collateralized loan obligations (CLOs), real estate funds, equity funds, and other alternative investment vehicles. Daniel Och, the Chief Executive Officer and Executive Managing Director at OZ Management, had acted as the Head of Proprietary Trading in the Equities division at Goldman Sachs prior to launching his own shop. Daniel Och is backed up by an experienced investment management team that consists of 596 employees worldwide, including 164 investment professionals and 23 active executive managing directors. OZ Management is well-known for its consistent performance history, global investing expertise, and its diverse investment strategies, which altogether have enabled it to be one of the most successful funds in the world. Daniel Och and his team currently manage a public equity portfolio with a value of $30.85 billion, with the firm’s top ten holdings accounting for 24.35% of that value.
But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect the hedge funds’ activities. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small cap stock picks among hedge funds also bested passive index funds by over 66 percentage points over the 34 month period beginning with September 2012, returning over 123% (read the details here).
Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT) is one of the leading hotel and leisure companies in the world with more than 1,200 properties in approximately 100 countries. The company is a fully integrated owner, operator and franchisor of hotels, resorts and residences, with the following brands: St. Regis, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points by Sheraton, Aloft, Element, and Tribute Portfolio. The share price of Starwood hasn’t changed too much since the beginning of the current year, decreasing by slightly over 1% year-to-date.
At the beginning of the current year, Starwood announced its plans to spin-off its vacation ownership business of 22 timeshare resorts into a separate publicly-traded company called Vistana Signature Experiences. The spin-off is part of Starwood’s plan of focusing on property management and franchising, which will assist the company in moving forward in its asset-light strategy. The vacation ownership business requires consistent investment in existing properties and in building new ones, therefore, the spin-off will allow Starwood to channel the raised capital towards developing its hotel and franchise business. The market reacted positively to the announced spin-off earlier this year and it seems that the opportunities created from this decision are already reflected in the share price of Starwood. The time-share businesses were a one-time booming profit generator for hotel companies that lost interest during the financial crisis, but Starwood’s decision of cutting its real estate holdings seems to be a win-win outcome for both Starwood and the soon-to-be created public company. On one hand, Vistana Signature Experiences will be able to exploit the growth in the time-share industry by investing in its properties and developing new ones. While on the other hand, Starwood will be able to focus on its primary asset-light strategy.