In this article we will take a look at whether hedge funds think Hyatt Hotels Corporation (NYSE:H) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Hyatt Hotels Corporation (NYSE:H) worth your attention right now? Prominent investors are getting less optimistic. The number of bullish hedge fund positions were trimmed by 3 in recent months. Our calculations also showed that H 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.
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 S&P 500 ETFs by more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the new hedge fund action encompassing Hyatt Hotels Corporation (NYSE:H).
How are hedge funds trading Hyatt Hotels Corporation (NYSE:H)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in H a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Melvin Capital Management held the most valuable stake in Hyatt Hotels Corporation (NYSE:H), which was worth $124.5 million at the end of the third quarter. On the second spot was Long Pond Capital which amassed $119.6 million worth of shares. Southeastern Asset Management, Select Equity Group, and Maverick Capital 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 Long Pond Capital allocated the biggest weight to Hyatt Hotels Corporation (NYSE:H), around 6.13% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, earmarking 2.66 percent of its 13F equity portfolio to H.
Judging by the fact that Hyatt Hotels Corporation (NYSE:H) has experienced falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers who sold off their positions entirely last quarter. Interestingly, Zach Schreiber’s Point State Capital said goodbye to the largest investment of the 750 funds watched by Insider Monkey, worth about $19.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $17.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Hyatt Hotels Corporation (NYSE:H) but similarly valued. These stocks are Casey’s General Stores, Inc. (NASDAQ:CASY), Acceleron Pharma Inc (NASDAQ:XLRN), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), and People’s United Financial, Inc. (NASDAQ:PBCT). All of these stocks’ market caps are closest 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 29 hedge funds with bullish positions and the average amount invested in these stocks was $344 million. That figure was $514 million in H’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand People’s United Financial, Inc. (NASDAQ:PBCT) is the least popular one with only 22 bullish hedge fund positions. Hyatt Hotels Corporation (NYSE:H) is not the least popular stock in this group but hedge fund interest is still below 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on H, though not to the same extent, as the stock returned 24.9% during the second quarter and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.