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Is Hilton Worldwide Holdings Inc (HLT) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Hilton Worldwide Holdings Inc (NYSE:HLT) based on that data.

Hilton Worldwide Holdings Inc (NYSE:HLT) investors should be aware of a decrease in hedge fund interest in recent months. Our calculations also showed that HLT 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.

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 S&P 500 ETFs by more than 44 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 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 stocks that are in our short portfolio.

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. 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. Keeping this in mind let’s take a look at the fresh hedge fund action regarding Hilton Worldwide Holdings Inc (NYSE:HLT).

How are hedge funds trading Hilton Worldwide Holdings Inc (NYSE:HLT)?

Heading into the second quarter of 2020, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 51 hedge funds with a bullish position in HLT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Pershing Square held the most valuable stake in Hilton Worldwide Holdings Inc (NYSE:HLT), which was worth $941 million at the end of the third quarter. On the second spot was D1 Capital Partners which amassed $759.5 million worth of shares. Eagle Capital Management, Lone Pine Capital, 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 16.52% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, earmarking 14.32 percent of its 13F equity portfolio to HLT.

Because Hilton Worldwide Holdings Inc (NYSE:HLT) has witnessed falling interest from the smart money, it’s safe to say that there was a specific group of money managers that slashed their entire stakes heading into Q4. Intriguingly, Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $247.8 million in stock. James Crichton’s fund, Hitchwood Capital Management, also dropped its stock, about $84.3 million worth. These moves are important to note, as total hedge fund interest was cut by 14 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hilton Worldwide Holdings Inc (NYSE:HLT) but similarly valued. These stocks are State Street Corporation (NYSE:STT), Sun Life Financial Inc. (NYSE:SLF), Franco-Nevada Corporation (NYSE:FNV), and Welltower Inc. (NYSE:WELL). All of these stocks’ market caps match HLT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STT 34 503359 -11
SLF 16 102769 0
FNV 21 896434 -3
WELL 25 313164 1
Average 24 453932 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $454 million. That figure was $3133 million in HLT’s case. State Street Corporation (NYSE:STT) 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 16 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 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately HLT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HLT were disappointed as the stock returned 16.2% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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