Hedge Funds Aren’t Crazy About Playa Hotels & Resorts N.V. (PLYA) Anymore

In this article you are going to find out whether hedge funds think Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Playa Hotels & Resorts N.V. (NASDAQ:PLYA) going to take off soon? Money managers are reducing their bets on the stock. The number of long hedge fund positions went down by 3 in recent months. Our calculations also showed that PLYA 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.

At the moment there are plenty of methods stock market investors have at their disposal to analyze stocks. Two of the most innovative methods are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top investment managers can outpace the S&P 500 by a significant margin (see the details here).

Thomas-Steyer Founder of Farallon Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. 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. Keeping this in mind we’re going to check out the latest hedge fund action regarding Playa Hotels & Resorts N.V. (NASDAQ:PLYA).

How have hedgies been trading Playa Hotels & Resorts N.V. (NASDAQ:PLYA)?

Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in PLYA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Farallon Capital, holds the most valuable position in Playa Hotels & Resorts N.V. (NASDAQ:PLYA). Farallon Capital has a $53.6 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is HG Vora Capital Management, managed by Parag Vora, which holds a $17.5 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Michael A. Price and Amos Meron’s Empyrean Capital Partners, Jonathan Kolatch’s Redwood Capital Management and David Steinberg and Eric Udoff’s Marlowe Partners. In terms of the portfolio weights assigned to each position DG Capital Management allocated the biggest weight to Playa Hotels & Resorts N.V. (NASDAQ:PLYA), around 5.96% of its 13F portfolio. Marlowe Partners is also relatively very bullish on the stock, designating 4.79 percent of its 13F equity portfolio to PLYA.

Seeing as Playa Hotels & Resorts N.V. (NASDAQ:PLYA) has faced bearish sentiment from the smart money, it’s safe to say that there is a sect of funds who were dropping their entire stakes last quarter. At the top of the heap, Isaac Corre’s Governors Lane cut the biggest stake of the 750 funds tracked by Insider Monkey, worth close to $14.9 million in stock, and Chuck Royce’s Royce & Associates was right behind this move, as the fund sold off about $5.7 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Playa Hotels & Resorts N.V. (NASDAQ:PLYA). These stocks are BBX Capital Corporation (NYSE:BBX), NextDecade Corporation (NASDAQ:NEXT), Delek Logistics Partners LP (NYSE:DKL), and Franchise Group, Inc. (NASDAQ:FRG). This group of stocks’ market valuations are closest to PLYA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBX 11 9735 -4
NEXT 5 166105 -2
DKL 1 687 -1
FRG 7 33719 2
Average 6 52562 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $113 million in PLYA’s case. BBX Capital Corporation (NYSE:BBX) is the most popular stock in this table. On the other hand Delek Logistics Partners LP (NYSE:DKL) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Playa Hotels & Resorts N.V. (NASDAQ:PLYA) 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 PLYA as the stock returned 100.6% 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.