Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Marriott Vacations Worldwide Corporation (NYSE:VAC).
Is VAC a good stock to buy now? Marriott Vacations Worldwide Corporation (NYSE:VAC) has seen a decrease in hedge fund interest lately. Marriott Vacations Worldwide Corporation (NYSE:VAC) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. Our calculations also showed that VAC 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most market participants, hedge funds are viewed as underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds trading today, Our researchers choose to focus on the aristocrats of this club, approximately 850 funds. These hedge fund managers oversee bulk of the hedge fund industry’s total asset base, and by monitoring their first-class stock picks, Insider Monkey has brought to light several investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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. With all of this in mind let’s view the recent hedge fund action regarding Marriott Vacations Worldwide Corporation (NYSE:VAC).
Do Hedge Funds Think VAC Is A Good Stock To Buy Now?
At third quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the second quarter of 2020. By comparison, 30 hedge funds held shares or bullish call options in VAC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Iridian Asset Management was the largest shareholder of Marriott Vacations Worldwide Corporation (NYSE:VAC), with a stake worth $113.4 million reported as of the end of September. Trailing Iridian Asset Management was Rima Senvest Management, which amassed a stake valued at $99.6 million. Tremblant Capital, Nantahala Capital Management, and AQR Capital Management 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 Rima Senvest Management allocated the biggest weight to Marriott Vacations Worldwide Corporation (NYSE:VAC), around 5.65% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, designating 2.75 percent of its 13F equity portfolio to VAC.
Judging by the fact that Marriott Vacations Worldwide Corporation (NYSE:VAC) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that decided to sell off their full holdings by the end of the third quarter. Interestingly, Robert Bishop’s Impala Asset Management dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $17 million in stock. Renaissance Technologies, also dumped its stock, about $16.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 7 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Marriott Vacations Worldwide Corporation (NYSE:VAC). These stocks are Physicians Realty Trust (NYSE:DOC), Ultrapar Participacoes SA (NYSE:UGP), Shell Midstream Partners LP (NYSE:SHLX), Exponent, Inc. (NASDAQ:EXPO), Emcor Group Inc (NYSE:EME), FibroGen Inc (NASDAQ:FGEN), and Axis Capital Holdings Limited (NYSE:AXS). This group of stocks’ market caps resemble VAC’s market cap.
|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 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $376 million in VAC’s case. Emcor Group Inc (NYSE:EME) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 6 bullish hedge fund positions. Marriott Vacations Worldwide Corporation (NYSE:VAC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VAC is 37.9. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on VAC as the stock returned 43.4% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.