DiamondRock Hospitality Company (NYSE:DRH) has experienced an increase in hedge fund interest lately.
In the eyes of most investors, hedge funds are viewed as worthless, old investment tools of the past. While there are more than 8000 funds in operation at present, we hone in on the leaders of this group, around 450 funds. It is widely believed that this group has its hands on the majority of the hedge fund industry’s total capital, and by monitoring their top equity investments, we have determined a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Equally as important, bullish insider trading sentiment is a second way to parse down the financial markets. As the old adage goes: there are a number of reasons for a corporate insider to get rid of shares of his or her company, but just one, very obvious reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this method if shareholders understand where to look (learn more here).
Keeping this in mind, let’s take a peek at the key action encompassing DiamondRock Hospitality Company (NYSE:DRH).
What have hedge funds been doing with DiamondRock Hospitality Company (NYSE:DRH)?
At the end of the first quarter, a total of 15 of the hedge funds we track held long positions in this stock, a change of 88% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly.
Of the funds we track, Long Pond Capital, managed by John Khoury, holds the largest position in DiamondRock Hospitality Company (NYSE:DRH). Long Pond Capital has a $50.2 million position in the stock, comprising 8.9% of its 13F portfolio. On Long Pond Capital’s heels is Ken Griffin of Citadel Investment Group, with a $42.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions include Ken Heebner’s Capital Growth Management, Richard S. Pzena’s Pzena Investment Management and Jim Simons’s Renaissance Technologies.
As one would reasonably expect, key hedge funds have been driving this bullishness. Long Pond Capital, managed by John Khoury, created the most outsized position in DiamondRock Hospitality Company (NYSE:DRH). Long Pond Capital had 50.2 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $23.4 million position during the quarter. The other funds with new positions in the stock are Steven Cohen’s SAC Capital Advisors, Peter Rathjens Bruce Clarke and John Campbell’s Arrowstreet Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.
How have insiders been trading DiamondRock Hospitality Company (NYSE:DRH)?
Insider trading activity, especially when it’s bullish, is most useful when the company in focus has experienced transactions within the past 180 days. Over the last six-month time period, DiamondRock Hospitality Company (NYSE:DRH) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to DiamondRock Hospitality Company (NYSE:DRH). These stocks are RLJ Lodging Trust (NYSE:RLJ), LaSalle Hotel Properties (NYSE:LHO), Pebblebrook Hotel Trust (NYSE:PEB), Sunstone Hotel Investors Inc (NYSE:SHO), and Strategic Hotels and Resorts Inc (NYSE:BEE). This group of stocks are in the reit – hotel/motel industry and their market caps are similar to DRH’s market cap.