The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Braemar Hotels & Resorts Inc. (NYSE:BHR).
Is Braemar Hotels & Resorts Inc. (NYSE:BHR) an attractive investment today? Hedge funds are getting less optimistic. The number of bullish hedge fund bets were trimmed by 2 recently. Our calculations also showed that BHR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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 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 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.
James Dondero of Highland Capital 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. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the new hedge fund action surrounding Braemar Hotels & Resorts Inc. (NYSE:BHR).
How are hedge funds trading Braemar Hotels & Resorts Inc. (NYSE:BHR)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in BHR 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.
Among these funds, Highland Capital Management held the most valuable stake in Braemar Hotels & Resorts Inc. (NYSE:BHR), which was worth $31.3 million at the end of the third quarter. On the second spot was Forward Management which amassed $12 million worth of shares. Renaissance Technologies, AQR Capital Management, and Sessa 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 Highland Capital Management allocated the biggest weight to Braemar Hotels & Resorts Inc. (NYSE:BHR), around 1.95% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, setting aside 1.82 percent of its 13F equity portfolio to BHR.
Seeing as Braemar Hotels & Resorts Inc. (NYSE:BHR) has faced a decline in interest from hedge fund managers, it’s safe to say that there were a few hedge funds who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $0.5 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund cut about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Braemar Hotels & Resorts Inc. (NYSE:BHR). We will take a look at Castle Biosciences, Inc. (NASDAQ:CSTL), Green Plains Partners LP (NASDAQ:GPP), Empresa Distribuidora y Comercializadora Norte Sociedad Anonima (NYSE:EDN), and Marlin Business Services Corp. (NASDAQ:MRLN). This group of stocks’ market caps resemble BHR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSTL | 12 | 38901 | 12 |
| GPP | 2 | 3131 | 0 |
| EDN | 3 | 1990 | -1 |
| MRLN | 5 | 102733 | 2 |
| Average | 5.5 | 36689 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $56 million in BHR’s case. Castle Biosciences, Inc. (NASDAQ:CSTL) is the most popular stock in this table. On the other hand Green Plains Partners LP (NASDAQ:GPP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Braemar Hotels & Resorts Inc. (NYSE:BHR) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BHR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BHR were disappointed as the stock returned 5.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
