Hedge Funds Have Never Been This Bullish On Playa Hotels & Resorts N.V. (PLYA)

In this article we are going to use hedge fund sentiment as a tool and determine whether Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Playa Hotels & Resorts N.V. (NASDAQ:PLYA) investors should pay attention to an increase in hedge fund interest in recent months. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) was in 31 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PLYA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Parag Vora - HG Vora Capital

Parag Vora of HG Vora Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the fresh hedge fund action surrounding Playa Hotels & Resorts N.V. (NASDAQ:PLYA).

Do Hedge Funds Think PLYA Is A Good Stock To Buy Now?

At Q2’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PLYA over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Rubric Capital Management, managed by David Rosen, holds the most valuable position in Playa Hotels & Resorts N.V. (NASDAQ:PLYA). Rubric Capital Management has a $68.8 million position in the stock, comprising 4.3% of its 13F portfolio. The second most bullish fund manager is Farallon Capital, holding a $62.1 million position; 0.3% of its 13F portfolio is allocated to the company. Some other peers with similar optimism encompass Parag Vora’s HG Vora Capital Management, David Steinberg and Eric Udoff’s Marlowe Partners and Malcolm Levine’s Dendur Capital. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Playa Hotels & Resorts N.V. (NASDAQ:PLYA), around 12.92% of its 13F portfolio. LDR Capital is also relatively very bullish on the stock, setting aside 5.6 percent of its 13F equity portfolio to PLYA.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Harbert Management, managed by Raymond J. Harbert, established the most outsized position in Playa Hotels & Resorts N.V. (NASDAQ:PLYA). Harbert Management had $4.4 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also initiated a $3.4 million position during the quarter. The following funds were also among the new PLYA investors: Ed Bosek’s BeaconLight Capital, Matthew Crandall Gilman’s Hill Winds Capital, and Randall Smith’s Alden Global Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Playa Hotels & Resorts N.V. (NASDAQ:PLYA). These stocks are Gogo Inc (NASDAQ:GOGO), Southside Bancshares, Inc. (NASDAQ:SBSI), Hawaiian Holdings, Inc. (NASDAQ:HA), Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), OrthoPediatrics Corp. (NASDAQ:KIDS), and Impinj, Inc. (NASDAQ:PI). This group of stocks’ market values resemble PLYA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOGO 22 180033 4
SBSI 8 40028 1
HA 16 63664 0
CCO 27 253209 -2
TRHC 4 15108 -3
KIDS 10 25879 2
PI 20 379200 2
Average 15.3 136732 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $325 million in PLYA’s case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is more popular among hedge funds. Our overall hedge fund sentiment score for PLYA is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on PLYA as the stock returned 14.1% since the end of June (through 10/15) 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.