It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 18.7% so far in 2019 and outperformed the S&P 500 ETF by 6.6 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards Hersha Hospitality Trust (NYSE:HT) changed during the first quarter.
Hersha Hospitality Trust (NYSE:HT) has experienced a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that HT isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to review the fresh hedge fund action encompassing Hersha Hospitality Trust (NYSE:HT).
How are hedge funds trading Hersha Hospitality Trust (NYSE:HT)?
At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HT over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Balyasny Asset Management was the largest shareholder of Hersha Hospitality Trust (NYSE:HT), with a stake worth $8.6 million reported as of the end of March. Trailing Balyasny Asset Management was Millennium Management, which amassed a stake valued at $7.5 million. Citadel Investment Group, Renaissance Technologies, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Hersha Hospitality Trust (NYSE:HT) has experienced bearish sentiment from the smart money, logic holds that there were a few hedge funds who sold off their positions entirely in the third quarter. It’s worth mentioning that Brian Gustavson and Andrew Haley’s 1060 Capital Management cut the largest stake of the 700 funds tracked by Insider Monkey, worth about $12.6 million in stock. Ken Grossman and Glen Schneider’s fund, SG Capital Management, also said goodbye to its stock, about $4.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hersha Hospitality Trust (NYSE:HT) but similarly valued. We will take a look at Intra-Cellular Therapies Inc (NASDAQ:ITCI), Global Partners LP (NYSE:GLP), Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), and QuinStreet Inc (NASDAQ:QNST). This group of stocks’ market valuations are closest to HT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ITCI | 12 | 43843 | -3 |
| GLP | 5 | 2786 | 1 |
| AXNX | 10 | 85113 | 0 |
| QNST | 25 | 200135 | -2 |
| Average | 13 | 82969 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $33 million in HT’s case. QuinStreet Inc (NASDAQ:QNST) is the most popular stock in this table. On the other hand Global Partners LP (NYSE:GLP) is the least popular one with only 5 bullish hedge fund positions. Hersha Hospitality Trust (NYSE:HT) 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HT investors were disappointed as the stock returned -0.4% during the same time period 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 among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
