Were Hedge Funds Right About Flocking Into Hilton Grand Vacations Inc. (HGV) ?

Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Hilton Grand Vacations Inc. (NYSE:HGV).

Hilton Grand Vacations Inc. (NYSE:HGV) has seen an increase in enthusiasm from smart money recently. Our calculations also showed that hgv isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Gates Gates Capital

We’re going to go over the latest hedge fund action encompassing Hilton Grand Vacations Inc. (NYSE:HGV).

How have hedgies been trading Hilton Grand Vacations Inc. (NYSE:HGV)?

At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the previous quarter. By comparison, 37 hedge funds held shares or bullish call options in HGV 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 increasing their stakes significantly (or already accumulated large positions).

No of Hedge Funds with HGV Positions

According to Insider Monkey’s hedge fund database, Long Pond Capital, managed by John Khoury, holds the number one position in Hilton Grand Vacations Inc. (NYSE:HGV). Long Pond Capital has a $181 million position in the stock, comprising 6.3% of its 13F portfolio. Sitting at the No. 2 spot is Claus Moller of P2 Capital Partners, with a $102.5 million position; the fund has 8.5% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism comprise Richard Mashaal’s Rima Senvest Management, Jeffrey Gates’s Gates Capital Management and Jonathon Jacobson’s Highfields Capital Management.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Waratah Capital Advisors, managed by Brad Dunkley and Blair Levinsky, initiated the most valuable position in Hilton Grand Vacations Inc. (NYSE:HGV). Waratah Capital Advisors had $28.3 million invested in the company at the end of the quarter. Robert Boucai’s Newbrook Capital Advisors also initiated a $20.6 million position during the quarter. The following funds were also among the new HGV investors: Steve Cohen’s Point72 Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Hilton Grand Vacations Inc. (NYSE:HGV) but similarly valued. We will take a look at Monro Inc (NASDAQ:MNRO), Mimecast Limited (NASDAQ:MIME), Chart Industries, Inc. (NASDAQ:GTLS), and Genesis Energy, L.P. (NYSE:GEL). This group of stocks’ market caps match HGV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MNRO 17 270085 -1
MIME 35 770740 12
GTLS 20 267307 5
GEL 3 22495 -2
Average 18.75 332657 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $764 million in HGV’s case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Hilton Grand Vacations Inc. (NYSE:HGV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately HGV wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HGV were disappointed as the stock returned -18.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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