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Hedge Funds Never Been Less Bullish On GreenTree Hospitality Group Ltd. (GHG)

In this article we will take a look at whether hedge funds think GreenTree Hospitality Group Ltd. (NYSE:GHG) 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.

GreenTree Hospitality Group Ltd. (NYSE:GHG) has seen a decrease in hedge fund interest lately. GHG was in 4 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with GHG positions at the end of the previous quarter. Our calculations also showed that GHG 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gifford Combs - Dalton Investments

Gifford Combs of Dalton Investments

At Insider Monkey 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 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 we’re going to take a glance at the key hedge fund action encompassing GreenTree Hospitality Group Ltd. (NYSE:GHG).

What have hedge funds been doing with GreenTree Hospitality Group Ltd. (NYSE:GHG)?

Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in GHG over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Dalton Investments, managed by Gifford Combs, holds the number one position in GreenTree Hospitality Group Ltd. (NYSE:GHG). Dalton Investments has a $8.4 million position in the stock, comprising 6.5% of its 13F portfolio. The second most bullish fund manager is Sylebra Capital Management, managed by Daniel Patrick Gibson, which holds a $8.3 million position; 0.3% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish contain Renaissance Technologies, Tim David’s Guardian Point Capital and . In terms of the portfolio weights assigned to each position Dalton Investments allocated the biggest weight to GreenTree Hospitality Group Ltd. (NYSE:GHG), around 6.52% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, setting aside 2.18 percent of its 13F equity portfolio to GHG.

Since GreenTree Hospitality Group Ltd. (NYSE:GHG) has witnessed a decline in interest from the smart money, it’s easy to see that there is a sect of hedge funds that elected to cut their entire stakes heading into Q4. It’s worth mentioning that Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management cut the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $4 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also sold off its stock, about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as GreenTree Hospitality Group Ltd. (NYSE:GHG) but similarly valued. We will take a look at Weis Markets, Inc. (NYSE:WMK), Retail Properties of America Inc (NYSE:RPAI), O-I Glass, Inc. (NYSE:OI), and Axos Financial, Inc. (NYSE:AX). All of these stocks’ market caps resemble GHG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WMK 12 30418 0
RPAI 20 74882 -1
OI 29 255135 9
AX 12 43447 -3
Average 18.25 100971 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $26 million in GHG’s case. O-I Glass, Inc. (NYSE:OI) is the most popular stock in this table. On the other hand Weis Markets, Inc. (NYSE:WMK) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks GreenTree Hospitality Group Ltd. (NYSE:GHG) is even less popular than WMK. Hedge funds clearly dropped the ball on GHG as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on GHG as the stock returned 21% so far in the second quarter and outperformed the market by an even larger margin.

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