Is Wyndham Hotels & Resorts, Inc. (NYSE:WH) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Wyndham Hotels & Resorts, Inc. (NYSE:WH) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Millicom International Cellular S.A. (NASDAQ:TIGO), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), and Jefferies Financial Group Inc. (NYSE:JEF) to gather more data points.
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’ 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.
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. Let’s take a look at the recent hedge fund action regarding Wyndham Hotels & Resorts, Inc. (NYSE:WH).
What does smart money think about Wyndham Hotels & Resorts, Inc. (NYSE:WH)?
At the end of the second quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards WH over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Wyndham Hotels & Resorts, Inc. (NYSE:WH) was held by Iridian Asset Management, which reported holding $165.4 million worth of stock at the end of March. It was followed by Millennium Management with a $107.6 million position. Other investors bullish on the company included Tremblant Capital, Permian Investment Partners, and Carlson Capital.
Judging by the fact that Wyndham Hotels & Resorts, Inc. (NYSE:WH) has faced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few fund managers that decided to sell off their entire stakes in the second quarter. Interestingly, Parag Vora’s HG Vora Capital Management sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising about $80 million in stock, and Richard Mashaal’s Rima Senvest Management was right behind this move, as the fund sold off about $26.8 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Wyndham Hotels & Resorts, Inc. (NYSE:WH). These stocks are Millicom International Cellular S.A. (NASDAQ:TIGO), Knight-Swift Transportation Holdings Inc. (NYSE:KNX), Jefferies Financial Group Inc. (NYSE:JEF), and HUYA Inc. (NYSE:HUYA). This group of stocks’ market valuations match WH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TIGO | 5 | 119486 | 0 |
| KNX | 23 | 262916 | -10 |
| JEF | 34 | 677810 | -1 |
| HUYA | 22 | 237304 | 1 |
| Average | 21 | 324379 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $878 million in WH’s case. Jefferies Financial Group Inc. (NYSE:JEF) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Wyndham Hotels & Resorts, Inc. (NYSE:WH) 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 WH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WH were disappointed as the stock returned -6.7% 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 (view the video below) among hedge funds as many of these stocks already outperformed the market in Q3.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
