Was The Smart Money Right About Loading Up On Wyndham Destinations, Inc. (WYND)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Wyndham Destinations, Inc. (NYSE:WYND).

Wyndham Destinations, Inc. (NYSE:WYND) has seen an increase in hedge fund interest lately. Wyndham Destinations, Inc. (NYSE:WYND) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that WYND isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 biggest telecom companies to identify fast growing companies in various industries. 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 to get excerpts of these letters in your inbox. With all of this in mind let’s analyze the latest hedge fund action regarding Wyndham Destinations, Inc. (NYSE:WYND).

How are hedge funds trading Wyndham Destinations, Inc. (NYSE:WYND)?

Heading into the third quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. The graph below displays the number of hedge funds with bullish position in WYND over the last 20 quarters. So, let’s see 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 Wyndham Destinations, Inc. (NYSE:WYND), with a stake worth $126.2 million reported as of the end of June. Trailing Iridian Asset Management was Rima Senvest Management, which amassed a stake valued at $95.1 million. Arrowstreet 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 Wyndham Destinations, Inc. (NYSE:WYND), around 5.93% of its 13F portfolio. Solel Partners is also relatively very bullish on the stock, dishing out 4.63 percent of its 13F equity portfolio to WYND.

As one would reasonably expect, specific money managers have jumped into Wyndham Destinations, Inc. (NYSE:WYND) headfirst. Tremblant Capital, managed by Brett Barakett, created the biggest position in Wyndham Destinations, Inc. (NYSE:WYND). Tremblant Capital had $18.3 million invested in the company at the end of the quarter. Craig Peskin and Peter Fleiss’s Solel Partners also made a $12.2 million investment in the stock during the quarter. The following funds were also among the new WYND investors: Michael Kahan and Jeremy Kahan’s North Peak Capital, Ryan Caldwell’s Chiron Investment Management, and Brad Stephens’s Six Columns Capital.

Let’s check out hedge fund activity in other stocks similar to Wyndham Destinations, Inc. (NYSE:WYND). We will take a look at IBERIABANK Corporation (NASDAQ:IBKC), Avient Corporation (NYSE:AVNT), Camping World Holdings, Inc. (NYSE:CWH), Federated Hermes, Inc. (NYSE:FHI), Evercore Inc. (NYSE:EVR), Arco Platform Limited (NASDAQ:ARCE), and ViaSat, Inc. (NASDAQ:VSAT). This group of stocks’ market valuations resemble WYND’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IBKC 26 201604 -4
AVNT 22 193411 -6
CWH 23 341511 7
FHI 30 167797 2
EVR 25 176532 -4
ARCE 25 183602 9
VSAT 23 1006955 2
Average 24.9 324487 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $435 million in WYND’s case. Federated Hermes, Inc. (NYSE:FHI) is the most popular stock in this table. On the other hand Avient Corporation (NYSE:AVNT) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Wyndham Destinations, Inc. (NYSE:WYND) is more popular among hedge funds. Our overall hedge fund sentiment score for WYND is 90. 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 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 returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on WYND as the stock returned 16.9% since the end of June (through 10/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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