Did Hedge Funds Drop The Ball On Marriott Vacations Worldwide Corporation (VAC) ?

The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Marriott Vacations Worldwide Corporation (NYSE:VAC) and find out how it is affected by hedge funds’ moves.

Is Marriott Vacations Worldwide Corporation (NYSE:VAC) ready to rally soon? The best stock pickers are taking a pessimistic view. The number of long hedge fund positions were trimmed by 6 lately. Our calculations also showed that vac isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Blair Levinsky of Waratah Capital Advisors

Let’s go over the key hedge fund action surrounding Marriott Vacations Worldwide Corporation (NYSE:VAC).

Hedge fund activity in Marriott Vacations Worldwide Corporation (NYSE:VAC)

At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in VAC over the last 14 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds With VAC Positions

The largest stake in Marriott Vacations Worldwide Corporation (NYSE:VAC) was held by Rima Senvest Management, which reported holding $147.1 million worth of stock at the end of September. It was followed by Nantahala Capital Management with a $56 million position. Other investors bullish on the company included D E Shaw, FrontFour Capital Group, and Waratah Capital Advisors.

Because Marriott Vacations Worldwide Corporation (NYSE:VAC) has faced a decline in interest from hedge fund managers, logic holds that there was a specific group of funds who sold off their entire stakes in the third quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising about $134.1 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $39.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 6 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Marriott Vacations Worldwide Corporation (NYSE:VAC). These stocks are Churchill Downs Incorporated (NASDAQ:CHDN), Eastgroup Properties Inc (NYSE:EGP), Schneider National, Inc. (NYSE:SNDR), and Taro Pharmaceutical Industries Ltd. (NYSE:TARO). This group of stocks’ market valuations resemble VAC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHDN 26 475766 0
EGP 7 25033 2
SNDR 20 92694 1
TARO 8 61336 -6
Average 15.25 163707 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $386 million in VAC’s case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 7 bullish hedge fund positions. Marriott Vacations Worldwide Corporation (NYSE:VAC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on VAC as the stock returned 51% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.