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Here is What Hedge Funds Think About RLJ Lodging Trust (RLJ)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of RLJ Lodging Trust (NYSE:RLJ).

RLJ Lodging Trust (NYSE:RLJ) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that RLJ 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.

Alan Reid Forward Management

J. Alan Reid, Jr. of Forward Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. 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 recent hedge fund action encompassing RLJ Lodging Trust (NYSE:RLJ).

How have hedgies been trading RLJ Lodging Trust (NYSE:RLJ)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the fourth quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in RLJ a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of RLJ Lodging Trust (NYSE:RLJ), with a stake worth $16 million reported as of the end of September. Trailing Fisher Asset Management was Forward Management, which amassed a stake valued at $9.8 million. Balyasny Asset Management, Arrowstreet Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Forward Management allocated the biggest weight to RLJ Lodging Trust (NYSE:RLJ), around 1.91% of its 13F portfolio. Oasis Management is also relatively very bullish on the stock, earmarking 0.79 percent of its 13F equity portfolio to RLJ.

Now, key hedge funds have jumped into RLJ Lodging Trust (NYSE:RLJ) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in RLJ Lodging Trust (NYSE:RLJ). Balyasny Asset Management had $9.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $5.3 million investment in the stock during the quarter. The following funds were also among the new RLJ investors: Matthew Hulsizer’s PEAK6 Capital Management, Eli Samaha’s Madison Avenue Partners, and David Brown’s Hawk Ridge Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as RLJ Lodging Trust (NYSE:RLJ) but similarly valued. These stocks are Stitch Fix, Inc. (NASDAQ:SFIX), Sunoco LP (NYSE:SUN), Yelp Inc (NYSE:YELP), and Compass Minerals International, Inc. (NYSE:CMP). This group of stocks’ market values are similar to RLJ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SFIX 16 79738 -12
SUN 4 7173 -2
YELP 25 235924 -2
CMP 16 82499 3
Average 15.25 101334 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $56 million in RLJ’s case. Yelp Inc (NYSE:YELP) is the most popular stock in this table. On the other hand Sunoco LP (NYSE:SUN) is the least popular one with only 4 bullish hedge fund positions. RLJ Lodging Trust (NYSE:RLJ) 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on RLJ as the stock returned 35.9% in Q2 (through June 17th) 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.