Is PEB A Good Stock To Buy Now?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Pebblebrook Hotel Trust (NYSE:PEB) based on that data.

Is PEB a good stock to buy now? The smart money was reducing their bets on the stock. The number of bullish hedge fund positions retreated by 4 lately. Pebblebrook Hotel Trust (NYSE:PEB) was in 9 hedge funds’ portfolios at the end of September. The all time high for this statistics is 22. Our calculations also showed that PEB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 13 hedge funds in our database with PEB holdings at the end of June.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are plenty of formulas stock traders put to use to size up stocks. Two of the most innovative formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best money managers can outclass their index-focused peers by a significant amount (see the details here).

Michael Weinstock - Monarch Alternative Capital

Michael Weinstock of Monarch Alternative Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let’s take a gander at the recent hedge fund action regarding Pebblebrook Hotel Trust (NYSE:PEB).

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

At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in PEB a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Parag Vora’s HG Vora Capital Management has the number one position in Pebblebrook Hotel Trust (NYSE:PEB), worth close to $47.6 million, corresponding to 3.6% of its total 13F portfolio. The second most bullish fund manager is Michael Weinstock of Monarch Alternative Capital, with a $9 million position; 1.5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish consist of Eduardo Abush’s Waterfront Capital Partners, Michael Gelband’s ExodusPoint Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to Pebblebrook Hotel Trust (NYSE:PEB), around 3.59% of its 13F portfolio. Monarch Alternative Capital is also relatively very bullish on the stock, earmarking 1.54 percent of its 13F equity portfolio to PEB.

Due to the fact that Pebblebrook Hotel Trust (NYSE:PEB) has faced bearish sentiment from hedge fund managers, we can see that there lies a certain “tier” of money managers who were dropping their full holdings by the end of the third quarter. It’s worth mentioning that Josh Resnick’s Jericho Capital Asset Management sold off the largest investment of all the hedgies watched by Insider Monkey, totaling an estimated $50.8 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $7.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Pebblebrook Hotel Trust (NYSE:PEB). These stocks are Mueller Water Products, Inc. (NYSE:MWA), Navient Corp (NASDAQ:NAVI), Uniqure NV (NASDAQ:QURE), Amarin Corporation plc (NASDAQ:AMRN), Adient plc (NYSE:ADNT), Celsius Holdings, Inc. (NASDAQ:CELH), and Hancock Whitney Corporation (NASDAQ:HWC). This group of stocks’ market values are closest to PEB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MWA 24 220024 3
NAVI 22 167531 -5
QURE 36 488681 -13
AMRN 30 299242 -2
ADNT 39 392944 4
CELH 17 65774 7
HWC 23 82566 0
Average 27.3 245252 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $245 million. That figure was $65 million in PEB’s case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Celsius Holdings, Inc. (NASDAQ:CELH) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Pebblebrook Hotel Trust (NYSE:PEB) is even less popular than CELH. Our overall hedge fund sentiment score for PEB is 13.3. 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 PEB as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on PEB as the stock returned 52.5% since Q3 (through December 8th) and outperformed the market by an even larger margin.

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