Perspecta (PRSP), Wyndham Hotels (WH) Tops Among Hedge Funds’ Favorite Newly-Listed Stocks

2018 has been a big year for IPOs, in terms of both quantity and performance. Through the end of July, 115 companies had made their public debuts on U.S exchanges, a 39% increase from the same period in 2017. More impressive still was those IPOs’ performance: six of them had gained over 150% as of the end of July, while no less than 37 of them (32% of all IPOs) had gained at least 30%.

Among the large list of stocks that debuted in the second-quarter, which included numerous spin-offs, hedge funds found a number of gems to invest in. Their favorites included Essential Properties Realty Trust Inc (NYSE:EPRT), nVent Electric PLC (NYSE:NVT), GreenSky Inc (NASDAQ:GSKY), Wyndham Hotels & Resorts Inc (NYSE:WH), and Perspecta Inc (NYSE:PRSP). We’ll check out the hedge fund activity in these stocks since they went public below.

Insider Monkey’s flagship “Best Performing Hedge Funds Strategy” has returned 107.5% since its May 2014 inception, crushing the S&P 500 by over 40 percentage points during that time. Among the seven stock picks recommended to our subscribers in our May 16 newsletter were a number of stocks which have debuted over the past five years, including FibroGen Inc (NASDAQ:FGEN), which gained over 14% during the 3-month period following the release of our picks. Zendesk Inc (NYSE:ZEN) produced similar results, gaining over 12% during that 3-month period. Check out a detailed analysis of Insider Monkey’s past performance and quarterly stock picks for all the details.

Essential Properties Realty Trust Inc (NYSE:EPRT)

Number of Hedge Fund Shareholders of EPRT (as of June 30): 23

Value of Hedge Funds’ Holdings in EPRT (as of June 30): $289.10 million

Essential Properties Realty Trust Inc (NYSE:EPRT) kicks off our list, with 23 of the hedge funds in our database buying the stock between its IPO date of June 21 and the end of that month. Ken Griffin’s Citadel Advisors (3.53 million shares), John Khoury’s Long Pond Capital (3 million shares), and Anand Parekh’s Alyeska Investment Group (2.43 million shares) opened the largest positions.

Essential Properties Realty Trust Inc (NYSE:EPRT) managed 530 properties as of March 31, 99.1% of which were occupied at that time. The majority of EPRT’s properties are single-tenant retail locations, with 77% of its tenants operating in the services sector. Mister Car Wash, 84 Lumber, and Mirabito are among EPRT’s top tenants. Analysts view EPRT’s portfolio favorably, while noting that there are heightened default risks from having a large collection of single-tenant leases.

nVent Electric PLC (NYSE:NVT)

Number of Hedge Fund Shareholders of NVT (as of June 30): 24

Value of Hedge Funds’ Holdings in NVT (as of June 30): $1.15 billion

nVent Electric PLC (NYSE:NVT) ranks as the fourth-most popular new stock with 24 hedge funds buying it in Q2 following its May 1 separation from Pentair PLC (NYSE:PNR). nVent also ranked as the top stock on this list with $1.15 billion in positions, lead by David Cohen and Harold Levy’s Iridian Asset Management (6.48 million shares). Larry Robbins‘ Glenview Capital was just behind that tally, with a 6.37 million-share stake.

As with many spin-offs, nVent Electric PLC (NYSE:NVT) offers investors a very focused company with a solid growth runway. nVent provides electrical connection and protection solutions, heat management systems, and fastenings for cable and wire systems. nVent’s first earnings report as a standalone public company was a success, as it delivered Q2 revenue of $543 million and EPS of $0.44, which beat estimates by $0.07. nVent’s board has already authorized a $500 million share buyback program as well, which currently amounts to about 10% of its float.

On the next page we’ll look check out the three new stocks in Q2 that hedge funds loved the most.

GreenSky Inc (NASDAQ:GSKY)

Number of Hedge Fund Shareholders of GSKY (as of June 30): 25

Value of Hedge Funds’ Holdings in GSKY (as of June 30): $145.98 million

GreenSky Inc (NASDAQ:GSKY) was the third-most popular newly-listed stock during Q2, with 25 hedge funds adding it to their 13F portfolios during the quarter. Israel Englander’s Millennium Management (1.32 million shares) and Christopher Medlock James’ Partner Fund Management (812,328 shares) were among the top new GreenSky shareholders.

GreenSky Inc (NASDAQ:GSKY) provides nearly instantaneous financing solutions for businesses and customers (with willing banks operating as the middlemen) that helps drive sales. GreenSky has aggressively grown its sales force in recent months and hiked its transaction volume by 36% in the second-quarter. With just over 13,000 companies in its fold, there is huge growth potential, which a recent strategic alliance with American Express Company (NYSE:AXP) should help accelerate.

Wyndham Hotels & Resorts Inc (NYSE:WH)

Number of Hedge Fund Shareholders of WH (as of June 30): 34

Value of Hedge Funds’ Holdings in WH (as of June 30): $841.55 million

Wyndham Hotels & Resorts Inc (NYSE:WH) was split off from the former Wyndham Worldwide in the second-quarter, which was rebranded as Wyndham Destinations Inc (NYSE:WYND) following the split. 34 hedge funds that we track were shareholders of Wyndham Worldwide’s former hotels business on June 30, including Brett Barakett’s Tremblant Capital (820,082 shares) and Clint Carlson’s Carlson Capital (700,000 shares).

Goldman Sachs added Wyndham Hotels & Resorts Inc (NYSE:WH) to its Conviction List in late-June, citing its exposure to inflecting oil patch markets and the potential synergies from its acquisition of La Quinta, which was finalized on the same day Wyndham Hotels was spun off (May 31). Wyndham’s Q2 revenue of $435 million widely missed estimates of $494.36 million, though its adjusted EPS of $0.86 handily topped the $0.78 consensus. Thanks to a growing middle class that is exhibiting a burgeoning appetite for travel, Wyndham could enjoy solid growth opportunities in the coming years.

Perspecta Inc (NYSE:PRSP)

Number of Hedge Fund Shareholders of PRSP (as of June 30): 50

Value of Hedge Funds’ Holdings in PRSP (as of June 30): $504.68 million

Topping the list is Perspecta Inc (NYSE:PRSP), another company that was spun-off during the second-quarter, in this case from DXC Technology Co (NYSE:DXC). Furthermore, the new company also completed its planned mergers with Vencore Inc. and KeyPoint Government Solutions ahead of its public debut. Lee Ainslie’s Maverick Capital (3.26 million shares) and James Dinan’s York Capital Management (2.36 million shares) were among Perspecta’s biggest bulls in the second-quarter.

While hedge funds have fully embraced Perspecta Inc (NYSE:PRSP), analysts appear to be taking a more cautious approach, noting that Perspecta will likely be relying on cost synergies to drive meaningful growth. Perspecta provides government agencies with analytics and data services, systems engineering and integration, and cybersecurity, among other technology solutions. The company’s pro-forma revenue was $1.04 billion in its fiscal 2019 first-quarter, up by 2% year-over-year.

Disclosure: None