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Do Hedge Funds Love Braemar Hotels & Resorts Inc. (BHR)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Braemar Hotels & Resorts Inc. (NYSE:BHR) based on that data and determine whether they were really smart about the stock.

Braemar Hotels & Resorts Inc. (NYSE:BHR) was in 13 hedge funds’ portfolios at the end of March. BHR investors should be aware of a decrease in support from the world’s most elite money managers recently. There were 20 hedge funds in our database with BHR holdings at the end of the previous quarter. Our calculations also showed that BHR 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Dondero Highland Capital Management

James Dondero of Highland Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 states that pay the most federal taxes to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. With all of this in mind let’s take a gander at the recent hedge fund action encompassing Braemar Hotels & Resorts Inc. (NYSE:BHR).

What does smart money think about Braemar Hotels & Resorts Inc. (NYSE:BHR)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -35% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in BHR a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

More specifically, Highland Capital Management was the largest shareholder of Braemar Hotels & Resorts Inc. (NYSE:BHR), with a stake worth $7.8 million reported as of the end of September. Trailing Highland Capital Management was Forward Management, which amassed a stake valued at $1.5 million. LDR Capital, Renaissance Technologies, and AQR Capital 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 LDR Capital allocated the biggest weight to Braemar Hotels & Resorts Inc. (NYSE:BHR), around 2.16% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, setting aside 1.47 percent of its 13F equity portfolio to BHR.

Judging by the fact that Braemar Hotels & Resorts Inc. (NYSE:BHR) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies that slashed their positions entirely heading into Q4. At the top of the heap, Israel Englander’s Millennium Management sold off the biggest investment of the 750 funds followed by Insider Monkey, comprising about $2.3 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dropped its stock, about $0.8 million worth. These moves are important to note, as total hedge fund interest fell by 7 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Braemar Hotels & Resorts Inc. (NYSE:BHR) but similarly valued. These stocks are LEAP THERAPEUTICS, INC. (NASDAQ:LPTX), AstroNova, Inc. (NASDAQ:ALOT), Synlogic, Inc. (NASDAQ:SYBX), and ReneSola Ltd. (NYSE:SOL). All of these stocks’ market caps are similar to BHR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LPTX 6 15568 2
ALOT 7 7527 0
SYBX 6 5652 -1
SOL 3 17210 1
Average 5.5 11489 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $13 million in BHR’s case. AstroNova, Inc. (NASDAQ:ALOT) is the most popular stock in this table. On the other hand ReneSola Ltd. (NYSE:SOL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Braemar Hotels & Resorts Inc. (NYSE:BHR) 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on BHR as the stock returned 58.8% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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