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Did Hedge Funds Make The Right Call On Wyndham Hotels & Resorts, Inc. (WH)?

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 thoughtWyndham Hotels & Resorts, Inc. (NYSE:WH) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Wyndham Hotels & Resorts, Inc. (NYSE:WH) shareholders have witnessed a decrease in hedge fund interest recently. WH was in 31 hedge funds’ portfolios at the end of March. There were 44 hedge funds in our database with WH holdings at the end of the previous quarter. Our calculations also showed that WH 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.

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.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 we are checking out this tiny lithium stock. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Wyndham Hotels & Resorts, Inc. (NYSE:WH).

How have hedgies been trading Wyndham Hotels & Resorts, Inc. (NYSE:WH)?

At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WH over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WH A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Long Pond Capital, managed by John Khoury, holds the biggest position in Wyndham Hotels & Resorts, Inc. (NYSE:WH). Long Pond Capital has a $159.7 million position in the stock, comprising 8.2% of its 13F portfolio. The second most bullish fund manager is Gates Capital Management, managed by Jeffrey Gates, which holds a $55.8 million position; the fund has 3.7% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Brett Barakett’s Tremblant Capital. In terms of the portfolio weights assigned to each position Solel Partners allocated the biggest weight to Wyndham Hotels & Resorts, Inc. (NYSE:WH), around 12.81% of its 13F portfolio. Impactive Capital is also relatively very bullish on the stock, setting aside 11.8 percent of its 13F equity portfolio to WH.

Due to the fact that Wyndham Hotels & Resorts, Inc. (NYSE:WH) has witnessed falling interest from the smart money, it’s easy to see that there was a specific group of funds who sold off their positions entirely heading into Q4. Interestingly, Alex Duran and Scott Hendrickson’s Permian Investment Partners dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $82.1 million in stock, and Martin Taylor’s Crake Asset Management was right behind this move, as the fund dumped about $28.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 13 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Wyndham Hotels & Resorts, Inc. (NYSE:WH) but similarly valued. We will take a look at Valley National Bancorp (NYSE:VLY), Perspecta Inc. (NYSE:PRSP), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), and Iridium Communications Inc. (NASDAQ:IRDM). This group of stocks’ market values resemble WH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VLY 22 24789 -2
PRSP 32 326939 -14
OLLI 19 96475 -9
IRDM 20 228723 0
Average 23.25 169232 -6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $501 million in WH’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the least popular one with only 19 bullish hedge fund positions. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on WH as the stock returned 35.5% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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