Were Hedge Funds Right About Dumping Expedia Group Inc (EXPE)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Expedia Group Inc (NASDAQ:EXPE) based on that data and determine whether they were really smart about the stock.

Expedia Group Inc (NASDAQ:EXPE) was in 41 hedge funds’ portfolios at the end of the first quarter of 2020. EXPE investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 59 hedge funds in our database with EXPE holdings at the end of the previous quarter. Our calculations also showed that EXPE 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Reeder PAR Capital Management

Paul Reeder of PAR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. 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. Keeping this in mind we’re going to take a gander at the latest hedge fund action encompassing Expedia Group Inc (NASDAQ:EXPE).

Hedge fund activity in Expedia Group Inc (NASDAQ:EXPE)

Heading into the second quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the fourth quarter of 2019. On the other hand, there were a total of 32 hedge funds with a bullish position in EXPE a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Gabriel Plotkin’s Melvin Capital Management has the number one position in Expedia Group Inc (NASDAQ:EXPE), worth close to $479.7 million, comprising 3.8% of its total 13F portfolio. Sitting at the No. 2 spot is Paul Reeder and Edward Shapiro of PAR Capital Management, with a $222.4 million position; the fund has 9.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include Brad Gerstner’s Altimeter Capital Management, Ken Griffin’s Citadel Investment Group and Gabriel Plotkin’s Melvin Capital Management. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to Expedia Group Inc (NASDAQ:EXPE), around 9.6% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, dishing out 9.44 percent of its 13F equity portfolio to EXPE.

Due to the fact that Expedia Group Inc (NASDAQ:EXPE) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of fund managers who were dropping their full holdings in the first quarter. Interestingly, Renaissance Technologies said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $100.2 million in stock, and Jacob Mitchell’s Antipodes Partners was right behind this move, as the fund sold off about $64.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 18 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Expedia Group Inc (NASDAQ:EXPE) but similarly valued. These stocks are Crown Holdings, Inc. (NYSE:CCK), Zscaler, Inc. (NASDAQ:ZS), Everest Re Group Ltd (NYSE:RE), and MGM Growth Properties LLC (NYSE:MGP). This group of stocks’ market valuations match EXPE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CCK 56 1217305 -2
ZS 27 274887 9
RE 27 558232 3
MGP 28 546863 -1
Average 34.5 649322 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $649 million. That figure was $1551 million in EXPE’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Zscaler, Inc. (NASDAQ:ZS) is the least popular one with only 27 bullish hedge fund positions. Expedia Group Inc (NASDAQ:EXPE) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on EXPE as the stock returned 46.1% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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