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Were Hedge Funds Right About Dumping Hyatt Hotels Corporation (H)?

The latest 13F reporting period has come and gone, and 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. Now, 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 you are going to find out whether hedge funds thoughtHyatt Hotels Corporation (NYSE:H) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Hyatt Hotels Corporation (NYSE:H) undervalued? Hedge funds were taking a bearish view. The number of long hedge fund bets shrunk by 3 recently. Our calculations also showed that H 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.

In today’s marketplace there are many formulas shareholders use to grade stocks. Two of the best formulas are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can trounce the S&P 500 by a superb amount (see the details here).

CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind let’s review the key hedge fund action regarding Hyatt Hotels Corporation (NYSE:H).

What does smart money think about Hyatt Hotels Corporation (NYSE:H)?

Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2019. By comparison, 24 hedge funds held shares or bullish call options in H a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is H A Good Stock To Buy?

Among these funds, Melvin Capital Management held the most valuable stake in Hyatt Hotels Corporation (NYSE:H), which was worth $124.5 million at the end of the third quarter. On the second spot was Long Pond Capital which amassed $119.6 million worth of shares. Southeastern Asset Management, Select Equity Group, and Maverick Capital 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 Long Pond Capital allocated the biggest weight to Hyatt Hotels Corporation (NYSE:H), around 6.13% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, dishing out 2.66 percent of its 13F equity portfolio to H.

Seeing as Hyatt Hotels Corporation (NYSE:H) has experienced falling interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds who were dropping their entire stakes by the end of the first quarter. Intriguingly, Zach Schreiber’s Point State Capital sold off the biggest investment of the 750 funds monitored by Insider Monkey, valued at close to $19.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund cut about $17.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Hyatt Hotels Corporation (NYSE:H). We will take a look at Casey’s General Stores, Inc. (NASDAQ:CASY), Acceleron Pharma Inc (NASDAQ:XLRN), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), and People’s United Financial, Inc. (NASDAQ:PBCT). This group of stocks’ market caps are similar to H’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CASY 23 158620 1
XLRN 38 775310 11
RETA 33 398437 4
PBCT 22 43269 0
Average 29 343909 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $344 million. That figure was $514 million in H’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand People’s United Financial, Inc. (NASDAQ:PBCT) is the least popular one with only 22 bullish hedge fund positions. Hyatt Hotels Corporation (NYSE:H) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market by 15.5 percentage points. Unfortunately H wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); H investors were disappointed as the stock returned 5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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