In this article we will take a look at whether hedge funds think Chatham Lodging Trust (NYSE:CLDT) 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.
Chatham Lodging Trust (NYSE:CLDT) has experienced a decrease in hedge fund interest lately. Our calculations also showed that CLDT 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.
If you’d ask most stock holders, hedge funds are perceived as underperforming, outdated investment vehicles of the past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the elite of this club, about 850 funds. These hedge fund managers orchestrate most of the smart money’s total asset base, and by observing their first-class investments, Insider Monkey has found various investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the key hedge fund action regarding Chatham Lodging Trust (NYSE:CLDT).
What does smart money think about Chatham Lodging Trust (NYSE:CLDT)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in CLDT a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Chatham Lodging Trust (NYSE:CLDT) was held by Renaissance Technologies, which reported holding $12.5 million worth of stock at the end of September. It was followed by Forward Management with a $4.7 million position. Other investors bullish on the company included Winton Capital Management, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Forward Management allocated the biggest weight to Chatham Lodging Trust (NYSE:CLDT), around 0.92% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to CLDT.
Judging by the fact that Chatham Lodging Trust (NYSE:CLDT) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers who were dropping their positions entirely heading into Q4. At the top of the heap, Minhua Zhang’s Weld Capital Management dumped the largest stake of all the hedgies followed by Insider Monkey, totaling an estimated $1.2 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dumped its stock, about $0.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Chatham Lodging Trust (NYSE:CLDT). We will take a look at Napco Security Technologies Inc (NASDAQ:NSSC), Crescent Capital BDC, Inc. (NASDAQ:CCAP), Cowen Inc. (NASDAQ:COWN), and Domo Inc. (NASDAQ:DOMO). All of these stocks’ market caps are closest to CLDT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $20 million in CLDT’s case. Cowen Inc. (NASDAQ:COWN) is the most popular stock in this table. On the other hand Napco Security Technologies Inc (NASDAQ:NSSC) is the least popular one with only 5 bullish hedge fund positions. Chatham Lodging Trust (NYSE:CLDT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.2% in 2020 through June 17th and surpassed the market by 14.8 percentage points. Unfortunately CLDT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CLDT investors were disappointed as the stock returned 19% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.