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Were Hedge Funds Right About Flocking Into Huazhu Group Limited (HTHT) ?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Huazhu Group Limited (NASDAQ:HTHT).

Huazhu Group Limited (NASDAQ:HTHT) investors should be aware of an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that HTHT isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Kerr Neilson

We’re going to check out the recent hedge fund action surrounding Huazhu Group Limited (NASDAQ:HTHT).

How are hedge funds trading Huazhu Group Limited (NASDAQ:HTHT)?

At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in HTHT a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HTHT_apr2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Yiheng Capital, managed by Jonathan Guo, holds the number one position in Huazhu Group Limited (NASDAQ:HTHT). Yiheng Capital has a $76.2 million position in the stock, comprising 11.2% of its 13F portfolio. On Yiheng Capital’s heels is Platinum Asset Management, led by Kerr Neilson, holding a $19.2 million position; 0.6% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions encompass Richard Driehaus’s Driehaus Capital, Cliff Asness’s AQR Capital Management and Charles Clough’s Clough Capital Partners.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Yiheng Capital, managed by Jonathan Guo, initiated the biggest position in Huazhu Group Limited (NASDAQ:HTHT). Yiheng Capital had $76.2 million invested in the company at the end of the quarter. Kerr Neilson’s Platinum Asset Management also made a $19.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital, Charles Clough’s Clough Capital Partners, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to Huazhu Group Limited (NASDAQ:HTHT). These stocks are BeiGene, Ltd. (NASDAQ:BGNE), Ralph Lauren Corporation (NYSE:RL), Jacobs Engineering Group Inc (NYSE:JEC), and United Rentals, Inc. (NYSE:URI). This group of stocks’ market valuations are closest to HTHT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BGNE 15 1967050 -8
RL 31 753923 3
JEC 33 879623 3
URI 48 713878 0
Average 31.75 1078619 -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 $1079 million. That figure was $147 million in HTHT’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand BeiGene, Ltd. (NASDAQ:BGNE) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Huazhu Group Limited (NASDAQ:HTHT) is even less popular than BGNE. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. 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 HTHT as the stock returned 36.3% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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

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