Did Hedge Funds Make The Right Call On Marriott Vacations Worldwide Corporation (VAC) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Marriott Vacations Worldwide Corporation (NYSE:VAC) and determine whether hedge funds skillfully traded this stock.

Marriott Vacations Worldwide Corporation (NYSE:VAC) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare VAC to other stocks including UFP Industries, Inc. (NASDAQ:UFPI), NCR Corporation (NYSE:NCR), and BlackBerry Limited (NYSE:BB) to get a better sense of its popularity.

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

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Steven Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind we’re going to take a glance at the latest hedge fund action regarding Marriott Vacations Worldwide Corporation (NYSE:VAC).

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

Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 26 hedge funds with a bullish position in VAC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Rima Senvest Management was the largest shareholder of Marriott Vacations Worldwide Corporation (NYSE:VAC), with a stake worth $111.4 million reported as of the end of September. Trailing Rima Senvest Management was Iridian Asset Management, which amassed a stake valued at $65.5 million. Nantahala Capital Management, Long Pond Capital, and Six Columns Capital 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 Rima Senvest Management allocated the biggest weight to Marriott Vacations Worldwide Corporation (NYSE:VAC), around 13.05% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, earmarking 2.01 percent of its 13F equity portfolio to VAC.

Due to the fact that Marriott Vacations Worldwide Corporation (NYSE:VAC) has experienced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds who sold off their positions entirely heading into Q4. It’s worth mentioning that Eric F. Billings’s Billings Capital Management said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $15.7 million in stock, and Brad Stephens’s Six Columns Capital was right behind this move, as the fund sold off about $5.5 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Marriott Vacations Worldwide Corporation (NYSE:VAC) but similarly valued. These stocks are UFP Industries, Inc. (NASDAQ:UFPI), NCR Corporation (NYSE:NCR), BlackBerry Limited (NYSE:BB), and Tempur Sealy International Inc. (NYSE:TPX). This group of stocks’ market caps match VAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UFPI 17 67371 -10
NCR 32 155675 0
BB 22 280349 -5
TPX 38 501858 -4
Average 27.25 251313 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $299 million in VAC’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand UFP Industries, Inc. (NASDAQ:UFPI) is the least popular one with only 17 bullish hedge fund positions. Marriott Vacations Worldwide Corporation (NYSE:VAC) is not the least popular stock in this group but hedge fund interest is still below average. 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 and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on VAC as the stock returned 47.9% during the second quarter and outperformed the market by an even larger margin.

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