It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Hilton Worldwide Holdings Inc (NYSE:HLT).
Hilton Worldwide Holdings Inc (NYSE:HLT) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. HLT was in 48 hedge funds’ portfolios at the end of the third quarter of 2019. There were 44 hedge funds in our database with HLT positions at the end of the previous quarter. Our calculations also showed that HLT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s view the fresh hedge fund action surrounding Hilton Worldwide Holdings Inc (NYSE:HLT).
How are hedge funds trading Hilton Worldwide Holdings Inc (NYSE:HLT)?
At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the second quarter of 2019. On the other hand, there were a total of 45 hedge funds with a bullish position in HLT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pershing Square was the largest shareholder of Hilton Worldwide Holdings Inc (NYSE:HLT), with a stake worth $982.9 million reported as of the end of September. Trailing Pershing Square was D1 Capital Partners, which amassed a stake valued at $561.5 million. Eagle Capital Management, Soroban Capital Partners, and Pelham Capital 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 Pelham Capital allocated the biggest weight to Hilton Worldwide Holdings Inc (NYSE:HLT), around 23.42% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, setting aside 15.69 percent of its 13F equity portfolio to HLT.
As one would reasonably expect, specific money managers have been driving this bullishness. Maverick Capital, managed by Lee Ainslie, created the most outsized position in Hilton Worldwide Holdings Inc (NYSE:HLT). Maverick Capital had $63 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $50.4 million investment in the stock during the quarter. The other funds with brand new HLT positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Donald Sussman’s Paloma Partners.
Let’s now take a look at hedge fund activity in other stocks similar to Hilton Worldwide Holdings Inc (NYSE:HLT). These stocks are Sun Life Financial Inc. (NYSE:SLF), Square, Inc. (NYSE:SQ), Southern Copper Corporation (NYSE:SCCO), and Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC). All of these stocks’ market caps are similar to HLT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLF | 12 | 259612 | 1 |
| SQ | 44 | 2375472 | -9 |
| SCCO | 13 | 175117 | -2 |
| ERIC | 20 | 352546 | 1 |
| Average | 22.25 | 790687 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $791 million. That figure was $3929 million in HLT’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Hilton Worldwide Holdings Inc (NYSE:HLT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on HLT as the stock returned 56% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
