Is HTHT Stock A Buy or Sell?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Huazhu Group Limited (NASDAQ:HTHT).

Is HTHT stock a buy? Huazhu Group Limited (NASDAQ:HTHT) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Huazhu Group Limited (NASDAQ:HTHT) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 21 hedge funds in our database with HTHT holdings at the end of September. Our calculations also showed that HTHT isn’t among the 30 most popular stocks among hedge funds (click for Q4 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’ 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 124 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.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Huazhu Group Limited (NASDAQ:HTHT).

Do Hedge Funds Think HTHT Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTHT over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Jonathan Guo’s Yiheng Capital has the biggest position in Huazhu Group Limited (NASDAQ:HTHT), worth close to $138.3 million, comprising 6.4% of its total 13F portfolio. Coming in second is Platinum Asset Management, managed by Kerr Neilson, which holds a $112.6 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Hyder Ahmad’s Broad Peak Investment Holdings and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Yiheng Capital allocated the biggest weight to Huazhu Group Limited (NASDAQ:HTHT), around 6.37% of its 13F portfolio. One01 Capital is also relatively very bullish on the stock, setting aside 5.92 percent of its 13F equity portfolio to HTHT.

Now, key money managers were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, established the biggest position in Huazhu Group Limited (NASDAQ:HTHT). Driehaus Capital had $37.8 million invested in the company at the end of the quarter. Canhui Ou’s One01 Capital also made a $14 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Jonathan Lourie and Stuart Fiertz’s Cheyne Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to Huazhu Group Limited (NASDAQ:HTHT). These stocks are Corteva, Inc. (NYSE:CTVA), Motorola Solutions Inc (NYSE:MSI), Stanley Black & Decker, Inc. (NYSE:SWK), Canadian Natural Resources Limited (NYSE:CNQ), Archer Daniels Midland Company (NYSE:ADM), Fastenal Company (NASDAQ:FAST), and Simon Property Group, Inc (NYSE:SPG). This group of stocks’ market valuations are closest to HTHT’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.9 hedge funds with bullish positions and the average amount invested in these stocks was $719 million. That figure was $612 million in HTHT’s case. Corteva, Inc. (NYSE:CTVA) is the most popular stock in this table. On the other hand Canadian Natural Resources Limited (NYSE:CNQ) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Huazhu Group Limited (NASDAQ:HTHT) is even less popular than CNQ. Our overall hedge fund sentiment score for HTHT is 37. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on HTHT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on HTHT as the stock returned 27.7% since Q4 (through April 19th) and outperformed the market by an even larger margin.

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

Follow Insider Monkey on Twitter