Should I Avoid Playa Hotels & Resorts N.V. (PLYA)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Playa Hotels & Resorts N.V. (NASDAQ:PLYA).

Playa Hotels & Resorts N.V. (NASDAQ:PLYA) has seen a decrease in hedge fund sentiment lately. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) was in 26 hedge funds’ portfolios at the end of September. The all time high for this statistic is 31. There were 31 hedge funds in our database with PLYA positions at the end of the second quarter. Our calculations also showed that PLYA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a gander at the key hedge fund action encompassing Playa Hotels & Resorts N.V. (NASDAQ:PLYA).

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

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

At the end of September, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the second quarter of 2021. By comparison, 16 hedge funds held shares or bullish call options in PLYA a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Playa Hotels & Resorts N.V. (NASDAQ:PLYA) was held by Rubric Capital Management, which reported holding $86.4 million worth of stock at the end of September. It was followed by HG Vora Capital Management with a $85 million position. Other investors bullish on the company included Farallon Capital, Marlowe Partners, and Dendur Capital. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Playa Hotels & Resorts N.V. (NASDAQ:PLYA), around 13.2% of its 13F portfolio. LDR Capital is also relatively very bullish on the stock, setting aside 5.63 percent of its 13F equity portfolio to PLYA.

Since Playa Hotels & Resorts N.V. (NASDAQ:PLYA) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few money managers who sold off their full holdings heading into Q4. Interestingly, Raymond J. Harbert’s Harbert Management sold off the largest position of the 750 funds tracked by Insider Monkey, comprising close to $4.4 million in stock. Randall Smith’s fund, Alden Global Capital, also sold off its stock, about $2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Playa Hotels & Resorts N.V. (NASDAQ:PLYA). We will take a look at Anavex Life Sciences Corp. (NASDAQ:AVXL), Sovos Brands Inc. (NASDAQ:SOVO), TTM Technologies, Inc. (NASDAQ:TTMI), F45 Training Holdings Inc. (NYSE:FXLV), Teekay LNG Partners L.P. (NYSE:TGP), PMV Pharmaceuticals, Inc. (NASDAQ:PMVP), and Itau CorpBanca (NYSE:ITCB). All of these stocks’ market caps resemble PLYA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVXL 7 9515 1
SOVO 17 107929 17
TTMI 15 77626 -4
FXLV 12 97921 12
TGP 10 26774 1
PMVP 21 649247 3
ITCB 1 1060 -1
Average 11.9 138582 4.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $395 million in PLYA’s case. PMV Pharmaceuticals, Inc. (NASDAQ:PMVP) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is more popular among hedge funds. Our overall hedge fund sentiment score for PLYA is 75.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Unfortunately PLYA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PLYA were disappointed as the stock returned -5.3% since the end of the third quarter (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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