At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Park Hotels & Resorts Inc. (NYSE:PK) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Park Hotels & Resorts Inc. (NYSE:PK) shareholders have witnessed a decrease in hedge fund interest recently. Park Hotels & Resorts Inc. (NYSE:PK) was in 21 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. There were 26 hedge funds in our database with PK holdings at the end of March. Our calculations also showed that PK isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to check out the fresh hedge fund action regarding Park Hotels & Resorts Inc. (NYSE:PK).
What does smart money think about Park Hotels & Resorts Inc. (NYSE:PK)?
At the end of the second quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in PK a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Park Hotels & Resorts Inc. (NYSE:PK) was held by Echo Street Capital Management, which reported holding $17.7 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $16.8 million position. Other investors bullish on the company included Renaissance Technologies, OZ Management, and D1 Capital Partners. In terms of the portfolio weights assigned to each position Sessa Capital allocated the biggest weight to Park Hotels & Resorts Inc. (NYSE:PK), around 0.65% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, designating 0.21 percent of its 13F equity portfolio to PK.
Because Park Hotels & Resorts Inc. (NYSE:PK) has experienced declining sentiment from the smart money, it’s easy to see that there exists a select few funds that decided to sell off their full holdings last quarter. It’s worth mentioning that Mason Hawkins’s Southeastern Asset Management dumped the biggest investment of all the hedgies monitored by Insider Monkey, totaling close to $90.2 million in stock, and Brian J. Higgins’s King Street Capital was right behind this move, as the fund cut about $19.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Park Hotels & Resorts Inc. (NYSE:PK) but similarly valued. These stocks are Taubman Centers, Inc. (NYSE:TCO), Rogers Corporation (NYSE:ROG), Boyd Gaming Corporation (NYSE:BYD), California Water Service Group (NYSE:CWT), Inspire Medical Systems, Inc. (NYSE:INSP), PacWest Bancorp (NASDAQ:PACW), and Compania de Minas Buenaventura S.A.A. (NYSE:BVN). This group of stocks’ market values match PK’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $232 million. That figure was $91 million in PK’s case. Taubman Centers, Inc. (NYSE:TCO) is the most popular stock in this table. On the other hand Compania de Minas Buenaventura S.A.A.(NYSE:BVN) is the least popular one with only 7 bullish hedge fund positions. Park Hotels & Resorts Inc. (NYSE:PK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PK is 39.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately PK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PK investors were disappointed as the stock returned 1% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.