Should You Avoid Huazhu Group Limited (HTHT)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Huazhu Group Limited (NASDAQ:HTHT) based on those filings.

Huazhu Group Limited (NASDAQ:HTHT) shareholders have witnessed a decrease in enthusiasm from smart money of late. Our calculations also showed that HTHT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Today there are a multitude of formulas shareholders have at their disposal to evaluate stocks. Some of the less utilized formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outclass their index-focused peers by a solid margin (see the details here).

David Blood

David Blood of Generation Investment Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the recent hedge fund action encompassing Huazhu Group Limited (NASDAQ:HTHT).

How have hedgies been trading Huazhu Group Limited (NASDAQ:HTHT)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in HTHT a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Yiheng Capital held the most valuable stake in Huazhu Group Limited (NASDAQ:HTHT), which was worth $87.3 million at the end of the third quarter. On the second spot was Platinum Asset Management which amassed $75.9 million worth of shares. Generation Investment Management, D E Shaw, 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 Yiheng Capital allocated the biggest weight to Huazhu Group Limited (NASDAQ:HTHT), around 6.87% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, dishing out 6.13 percent of its 13F equity portfolio to HTHT.

Because Huazhu Group Limited (NASDAQ:HTHT) has experienced a decline in interest from hedge fund managers, logic holds that there exists a select few fund managers that slashed their entire stakes heading into Q4. Interestingly, Josh Resnick’s Jericho Capital Asset Management said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $33 million in stock, and Run Ye, Junji Takegami and Hoyon Hwang’s Tiger Pacific Capital was right behind this move, as the fund dumped about $4.7 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Huazhu Group Limited (NASDAQ:HTHT). We will take a look at Molson Coors Beverage Company (NYSE:TAP), Concho Resources Inc. (NYSE:CXO), Cna Financial Corporation (NYSE:CNA), and Kirkland Lake Gold Ltd. (NYSE:KL). All of these stocks’ market caps are closest to HTHT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TAP 34 258923 3
CXO 31 492191 -8
CNA 12 51546 -3
KL 28 552273 4
Average 26.25 338733 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $339 million. That figure was $256 million in HTHT’s case. Molson Coors Beverage Company (NYSE:TAP) is the most popular stock in this table. On the other hand Cna Financial Corporation (NYSE:CNA) is the least popular one with only 12 bullish hedge fund positions. Huazhu Group Limited (NASDAQ:HTHT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on HTHT as the stock returned 27.4% during the second quarter and outperformed the market by an even larger margin.

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