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Hedge Funds Have Never Been This Bullish On Service Properties Trust (SVC)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Service Properties Trust (NASDAQ:SVC).

Service Properties Trust (NASDAQ:SVC) investors should be aware of an increase in activity from the world’s largest hedge funds recently. SVC was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 17 hedge funds in our database with SVC positions at the end of the previous quarter. Our calculations also showed that SVC 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.

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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. With all of this in mind let’s take a glance at the latest hedge fund action regarding Service Properties Trust (NASDAQ:SVC).

What does smart money think about Service Properties Trust (NASDAQ:SVC)?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 35% from the fourth quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in SVC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Service Properties Trust (NASDAQ:SVC) was held by Pzena Investment Management, which reported holding $7.4 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $6.6 million position. Other investors bullish on the company included Renaissance Technologies, Citadel Investment Group, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Hourglass Capital allocated the biggest weight to Service Properties Trust (NASDAQ:SVC), around 0.62% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to SVC.

Consequently, specific money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Service Properties Trust (NASDAQ:SVC). Arrowstreet Capital had $2.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Donald Sussman’s Paloma Partners, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out hedge fund activity in other stocks similar to Service Properties Trust (NASDAQ:SVC). These stocks are Odonate Therapeutics, Inc. (NASDAQ:ODT), Immunovant, Inc. (NASDAQ:IMVT), Spirit Airlines Incorporated (NYSE:SAVE), and Black Diamond Therapeutics, Inc. (NASDAQ:BDTX). This group of stocks’ market values are similar to SVC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ODT 13 471188 -2
IMVT 28 146496 6
SAVE 28 86042 -9
BDTX 13 162606 13
Average 20.5 216583 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $31 million in SVC’s case. Immunovant, Inc. (NASDAQ:IMVT) is the most popular stock in this table. On the other hand Odonate Therapeutics, Inc. (NASDAQ:ODT) is the least popular one with only 13 bullish hedge fund positions. Service Properties Trust (NASDAQ:SVC) is not the most popular stock in this group but hedge fund interest is still above 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 still beat the market by 14.2 percentage points. Hedge funds were also right about betting on SVC as the stock returned 100.3% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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