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Did Hedge Funds Make The Right Call On Hilton Grand Vacations Inc. (HGV) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtHilton Grand Vacations Inc. (NYSE:HGV) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Hilton Grand Vacations Inc. (NYSE:HGV) was in 29 hedge funds’ portfolios at the end of March. HGV investors should be aware of a decrease in support from the world’s most elite money managers recently. There were 46 hedge funds in our database with HGV positions at the end of the previous quarter. Our calculations also showed that HGV 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are many methods shareholders employ to size up stocks. A duo of the most useful methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the elite money managers can trounce the market by a solid amount (see the details here).

Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Hilton Grand Vacations Inc. (NYSE:HGV).

What have hedge funds been doing with Hilton Grand Vacations Inc. (NYSE:HGV)?

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -37% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in HGV a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Is HGV A Good Stock To Buy?

Among these funds, Zimmer Partners held the most valuable stake in Hilton Grand Vacations Inc. (NYSE:HGV), which was worth $120.8 million at the end of the third quarter. On the second spot was Long Pond Capital which amassed $74.7 million worth of shares. P2 Capital Partners, Centerbridge Partners, and Rima Senvest Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Centerbridge Partners allocated the biggest weight to Hilton Grand Vacations Inc. (NYSE:HGV), around 15.68% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, designating 8.48 percent of its 13F equity portfolio to HGV.

Because Hilton Grand Vacations Inc. (NYSE:HGV) has faced a decline in interest from the smart money, logic holds that there lies a certain “tier” of hedge funds who sold off their full holdings heading into Q4. It’s worth mentioning that Noam Gottesman’s GLG Partners cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $20.3 million in stock. Renaissance Technologies, also said goodbye to its stock, about $8.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 17 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hilton Grand Vacations Inc. (NYSE:HGV) but similarly valued. We will take a look at Glaukos Corporation (NYSE:GKOS), InVitae Corporation (NYSE:NVTA), 2U Inc (NASDAQ:TWOU), and Dicerna Pharmaceuticals Inc (NASDAQ:DRNA). This group of stocks’ market caps match HGV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GKOS 15 83596 -1
NVTA 10 225622 -3
TWOU 14 157558 -4
DRNA 25 281860 -6
Average 16 187159 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $513 million in HGV’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand InVitae Corporation (NYSE:NVTA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Hilton Grand Vacations Inc. (NYSE:HGV) is more popular among hedge funds. 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on HGV, though not to the same extent, as the stock returned 24% in Q2 and outperformed the market as well.

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