Here’s What Hedge Funds Think About Xenia Hotels & Resorts Inc (XHR)

“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Xenia Hotels & Resorts Inc (NYSE:XHR).

Is Xenia Hotels & Resorts Inc (NYSE:XHR) going to take off soon? Prominent investors are taking an optimistic view. The number of long hedge fund bets inched up by 4 in recent months. Our calculations also showed that xhr isn’t among the 30 most popular stocks among hedge funds. XHR was in 13 hedge funds’ portfolios at the end of December. There were 9 hedge funds in our database with XHR positions at the end of the previous quarter.

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 32 percentage points since May 2014 through March 12, 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.

Dmitry Balyasny

Let’s review the fresh hedge fund action encompassing Xenia Hotels & Resorts Inc (NYSE:XHR).

How have hedgies been trading Xenia Hotels & Resorts Inc (NYSE:XHR)?

Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 44% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in XHR over the last 14 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

No of Hedge Funds with XHR Positions

More specifically, Renaissance Technologies was the largest shareholder of Xenia Hotels & Resorts Inc (NYSE:XHR), with a stake worth $14.2 million reported as of the end of September. Trailing Renaissance Technologies was Balyasny Asset Management, which amassed a stake valued at $13.1 million. GLG Partners, Millennium Management, and Echo Street Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, key money managers have jumped into Xenia Hotels & Resorts Inc (NYSE:XHR) headfirst. Echo Street Capital Management, managed by Greg Poole, assembled the biggest position in Xenia Hotels & Resorts Inc (NYSE:XHR). Echo Street Capital Management had $7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.7 million position during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Xenia Hotels & Resorts Inc (NYSE:XHR) but similarly valued. These stocks are International Speedway Corporation (NASDAQ:ISCA), Upwork Inc. (NASDAQ:UPWK), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and Cott Corporation (NYSE:COT). This group of stocks’ market caps match XHR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ISCA 20 137886 3
UPWK 7 27815 7
ARNA 25 354292 0
COT 28 539524 3
Average 20 264879 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $265 million. That figure was $66 million in XHR’s case. Cott Corporation (NYSE:COT) is the most popular stock in this table. On the other hand Upwork Inc. (NASDAQ:UPWK) is the least popular one with only 7 bullish hedge fund positions. Xenia Hotels & Resorts Inc (NYSE:XHR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on XHR, though not to the same extent, as the stock returned 23.5% and outperformed the market as well.

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