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Were Hedge Funds Right About Ditching Summit Hotel Properties Inc (INN)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Summit Hotel Properties Inc (NYSE:INN) and determine whether the smart money was really smart about this stock.

Is Summit Hotel Properties Inc (NYSE:INN) a cheap stock to buy now? Hedge funds were getting less bullish. The number of long hedge fund positions were cut by 3 in recent months. Our calculations also showed that INN 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). INN was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 15 hedge funds in our database with INN holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are dozens of formulas investors put to use to grade their stock investments. A pair of the less known formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the S&P 500 by a healthy margin (see the details here).

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the key hedge fund action regarding Summit Hotel Properties Inc (NYSE:INN).

What does smart money think about Summit Hotel Properties Inc (NYSE:INN)?

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in INN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

More specifically, Balyasny Asset Management was the largest shareholder of Summit Hotel Properties Inc (NYSE:INN), with a stake worth $3.2 million reported as of the end of September. Trailing Balyasny Asset Management was Renaissance Technologies, which amassed a stake valued at $2.1 million. Millennium Management, Citadel Investment Group, and Fisher Asset 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 Forward Management allocated the biggest weight to Summit Hotel Properties Inc (NYSE:INN), around 0.04% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to INN.

Due to the fact that Summit Hotel Properties Inc (NYSE:INN) has faced bearish sentiment from hedge fund managers, it’s safe to say that there were a few fund managers who were dropping their entire stakes last quarter. At the top of the heap, Richard Driehaus’s Driehaus Capital cut the biggest investment of the 750 funds monitored by Insider Monkey, comprising about $4.8 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund sold off about $0.9 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 3 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Summit Hotel Properties Inc (NYSE:INN). These stocks are Ranpak Holdings Corp (NYSE:PACK), Foundation Building Materials, Inc. (NYSE:FBM), ArcBest Corp (NASDAQ:ARCB), and RPC, Inc. (NYSE:RES). All of these stocks’ market caps match INN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PACK 14 253601 -3
FBM 12 44726 -9
ARCB 11 41768 -2
RES 11 14862 -2
Average 12 88739 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $9 million in INN’s case. Ranpak Holdings Corp (NYSE:PACK) is the most popular stock in this table. On the other hand ArcBest Corp (NASDAQ:ARCB) is the least popular one with only 11 bullish hedge fund positions. Summit Hotel Properties Inc (NYSE:INN) 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on INN as the stock returned 40.5% 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.