We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ashford Hospitality Trust, Inc. (NYSE:AHT).
Ashford Hospitality Trust, Inc. (NYSE:AHT) has experienced an increase in enthusiasm from smart money recently. AHT was in 11 hedge funds’ portfolios at the end of June. There were 9 hedge funds in our database with AHT positions at the end of the previous quarter. Our calculations also showed that AHT isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 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.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let’s analyze the latest hedge fund action encompassing Ashford Hospitality Trust, Inc. (NYSE:AHT).
Hedge fund activity in Ashford Hospitality Trust, Inc. (NYSE:AHT)
At Q2’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in AHT over the last 16 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Ashford Hospitality Trust, Inc. (NYSE:AHT), with a stake worth $20.8 million reported as of the end of March. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $2 million. AQR Capital Management, Highland Capital Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have been driving this bullishness. Highland Capital Management, managed by James Dondero, established the most outsized position in Ashford Hospitality Trust, Inc. (NYSE:AHT). Highland Capital Management had $0.5 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.2 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Matthew Hulsizer’s PEAK6 Capital Management, and Minhua Zhang’s Weld Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ashford Hospitality Trust, Inc. (NYSE:AHT) but similarly valued. These stocks are Greenhill & Co., Inc. (NYSE:GHL), Daktronics, Inc. (NASDAQ:DAKT), Southern First Bancshares, Inc. (NASDAQ:SFST), and Sientra Inc (NASDAQ:SIEN). This group of stocks’ market valuations are similar to AHT’s market valuation.
|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 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $26 million in AHT’s case. Sientra Inc (NASDAQ:SIEN) is the most popular stock in this table. On the other hand Southern First Bancshares, Inc. (NASDAQ:SFST) is the least popular one with only 7 bullish hedge fund positions. Ashford Hospitality Trust, Inc. (NYSE:AHT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AHT as the stock returned 13.5% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.