Were Hedge Funds Right About Piling Into Hilton Worldwide Holdings Inc (HLT)?

Is Hilton Worldwide Holdings Inc (NYSE:HLT) a buy right now? The smart money is getting more bullish. The number of bullish hedge fund bets rose by 2 lately. Our calculations also showed that HLT isn’t among the 30 most popular stocks among hedge funds. HLT was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 45 hedge funds in our database with HLT positions at the end of the previous quarter.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.


Let’s take a look at the fresh hedge fund action regarding Hilton Worldwide Holdings Inc (NYSE:HLT).

Hedge fund activity in Hilton Worldwide Holdings Inc (NYSE:HLT)

At Q4’s end, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in HLT over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).


Among these funds, Pershing Square held the most valuable stake in Hilton Worldwide Holdings Inc (NYSE:HLT), which was worth $786 million at the end of the third quarter. On the second spot was D1 Capital Partners which amassed $370.5 million worth of shares. Moreover, Long Pond Capital, OZ Management, and Eagle Capital Management were also bullish on Hilton Worldwide Holdings Inc (NYSE:HLT), allocating a large percentage of their portfolios to this stock.

Consequently, specific money managers have jumped into Hilton Worldwide Holdings Inc (NYSE:HLT) headfirst. Pershing Square, managed by Bill Ackman, initiated the largest position in Hilton Worldwide Holdings Inc (NYSE:HLT). Pershing Square had $786 million invested in the company at the end of the quarter. Daniel Sundheim’s D1 Capital Partners also made a $370.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Boykin Curry’s Eagle Capital Management, Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners, and Jonathan Litt’s Land & Buildings Investment Management.

Let’s also examine hedge fund activity in other stocks similar to Hilton Worldwide Holdings Inc (NYSE:HLT). These stocks are Atlassian Corporation Plc (NASDAQ:TEAM), Zimmer Biomet Holdings Inc (NYSE:ZBH), Lam Research Corporation (NASDAQ:LRCX), and AutoZone, Inc. (NYSE:AZO). All of these stocks’ market caps are closest to HLT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TEAM 34 1085223 6
ZBH 36 1037508 -4
LRCX 36 862903 2
AZO 40 1625815 10
Average 36.5 1152862 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1153 million. That figure was $4153 million in HLT’s case. AutoZone, Inc. (NYSE:AZO) is the most popular stock in this table. On the other hand Atlassian Corporation Plc (NASDAQ:TEAM) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks Hilton Worldwide Holdings Inc (NYSE:HLT) is more popular among hedge funds. Hedge funds clearly know what they were doing in this case. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on HLT as the stock also returned 19.7% and outperformed the market as well.

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