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

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Expedia Group, Inc. (NASDAQ:EXPE) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Expedia Group, Inc. (NASDAQ:EXPE) a buy, sell, or hold? Prominent investors are buying. The number of long hedge fund positions inched up by 22 recently. Our calculations also showed that EXPE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 41 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Parag Vora - HG Vora Capital

Parag Vora of HG Vora Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the recent hedge fund action encompassing Expedia Group, Inc.(NASDAQ:EXPE).

How are hedge funds trading Expedia Group, Inc. (NASDAQ:EXPE)?

At the end of the fourth quarter, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 59% from one quarter earlier. On the other hand, there were a total of 39 hedge funds with a bullish position in EXPE a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Paul Reeder and Edward Shapiro’s PAR Capital Management has the most valuable position in Expedia Group, Inc. (NASDAQ:EXPE), worth close to $854.1 million, accounting for 16.6% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $483.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Brad Gerstner’s Altimeter Capital Management, Israel Englander’s Millennium Management and Gabriel Plotkin’s Melvin Capital Management. In terms of the portfolio weights assigned to each position PAR Capital Management allocated the biggest weight to Expedia Group, Inc.(NASDAQ:EXPE), around 16.62% of its 13F portfolio. HG Vora Capital Management is also relatively very bullish on the stock, setting aside 12.68 percent of its 13F equity portfolio to EXPE.

Consequently, key money managers were leading the bulls’ herd. Melvin Capital Management, managed by Gabriel Plotkin, initiated the biggest position in Expedia Group, Inc. (NASDAQ:EXPE). Melvin Capital Management had $162.2 million invested in the company at the end of the quarter. Parag Vora’s HG Vora Capital Management also made a $135.2 million investment in the stock during the quarter. The other funds with brand new EXPE positions are Anand Parekh’s Alyeska Investment Group, Steve Cohen’s Point72 Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks similar to Expedia Group, Inc. (NASDAQ:EXPE). These stocks are Seagate Technology plc (NASDAQ:STX), Loews Corporation (NYSE:L), Huntington Bancshares Incorporated (NASDAQ:HBAN), and Cheniere Energy, Inc. (NYSE:LNG). This group of stocks’ market values are similar to EXPE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STX 35 2826852 5
L 24 213525 -6
HBAN 25 44928 3
LNG 43 3483314 0
Average 31.75 1642155 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $1642 million. That figure was $3035 million in EXPE’s case. Cheniere Energy, Inc. (NYSE:LNG) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Expedia Group, Inc. (NASDAQ:EXPE) is more popular among hedge funds. 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 lost 1.0% in 2020 through April 20th and still beat the market by 11 percentage points. Unfortunately EXPE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EXPE were disappointed as the stock returned -44.4% during the three months of 2020 (through April 20th) 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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