Hedge Funds Have Never Been Less Bullish On Xenia Hotels & Resorts Inc (XHR)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Xenia Hotels & Resorts Inc (NYSE:XHR).

Xenia Hotels & Resorts Inc (NYSE:XHR) investors should be aware of a decrease in support from the world’s most elite money managers recently. XHR was in 8 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with XHR holdings at the end of the previous quarter. Our calculations also showed that XHR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a gander at the recent hedge fund action encompassing Xenia Hotels & Resorts Inc (NYSE:XHR).

How have hedgies been trading Xenia Hotels & Resorts Inc (NYSE:XHR)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the second quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in XHR a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is XHR A Good Stock To Buy?

The largest stake in Xenia Hotels & Resorts Inc (NYSE:XHR) was held by AQR Capital Management, which reported holding $7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $6.9 million position. Other investors bullish on the company included Two Sigma Advisors, Wexford Capital, and Driehaus Capital. In terms of the portfolio weights assigned to each position Wexford Capital allocated the biggest weight to Xenia Hotels & Resorts Inc (NYSE:XHR), around 0.1% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to XHR.

Due to the fact that Xenia Hotels & Resorts Inc (NYSE:XHR) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Noam Gottesman’s GLG Partners said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, valued at an estimated $2.6 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $1.7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Xenia Hotels & Resorts Inc (NYSE:XHR). These stocks are Hutchison China MediTech Limited (NASDAQ:HCM), YETI Holdings, Inc. (NYSE:YETI), Red Rock Resorts, Inc. (NASDAQ:RRR), and Welbilt, Inc. (NYSE:WBT). This group of stocks’ market values are similar to XHR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HCM 10 14449 -13
YETI 11 46603 -1
RRR 17 353606 1
WBT 26 792934 1
Average 16 301898 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $20 million in XHR’s case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Xenia Hotels & Resorts Inc (NYSE:XHR) is even less popular than HCM. Hedge funds dodged a bullet by taking a bearish stance towards XHR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately XHR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); XHR investors were disappointed as the stock returned -0.3% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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