While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Hyatt Hotels Corporation (NYSE:H).
Is Hyatt Hotels Corporation (NYSE:H) a good stock to buy now? Investors who are in the know are becoming less confident. The number of bullish hedge fund positions retreated by 1 recently. Our calculations also showed that H isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the recent hedge fund action regarding Hyatt Hotels Corporation (NYSE:H).
How are hedge funds trading Hyatt Hotels Corporation (NYSE:H)?
At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in H over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of Hyatt Hotels Corporation (NYSE:H), with a stake worth $348.4 million reported as of the end of March. Trailing Select Equity Group was Long Pond Capital, which amassed a stake valued at $226.2 million. D E Shaw, Echo Street Capital Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Hyatt Hotels Corporation (NYSE:H) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedge funds that decided to sell off their positions entirely last quarter. Intriguingly, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital dropped the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $2.8 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dumped its stock, about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Hyatt Hotels Corporation (NYSE:H). We will take a look at RenaissanceRe Holdings Ltd. (NYSE:RNR), Nordson Corporation (NASDAQ:NDSN), Omega Healthcare Investors Inc (NYSE:OHI), and Brookfield Property Partners LP (NASDAQ:BPY). This group of stocks’ market caps are similar to H’s market cap.
|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 15 hedge funds with bullish positions and the average amount invested in these stocks was $277 million. That figure was $847 million in H’s case. RenaissanceRe Holdings Ltd. (NYSE:RNR) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NASDAQ:BPY) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Hyatt Hotels Corporation (NYSE:H) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately H wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on H were disappointed as the stock returned -3% during 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.