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

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. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Hilton Grand Vacations Inc. (NYSE:HGV).

Hilton Grand Vacations Inc. (NYSE:HGV) was in 46 hedge funds’ portfolios at the end of December. HGV investors should pay attention to an increase in hedge fund sentiment of late. There were 43 hedge funds in our database with HGV holdings at the end of the previous quarter. Our calculations also showed that HGV 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).

According to most traders, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are greater than 8000 funds trading today, Our experts choose to focus on the bigwigs of this club, about 850 funds. These money managers manage bulk of the smart money’s total asset base, and by tracking their best equity investments, Insider Monkey has figured out many investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Xiniya Earnings Call Transcript XNY 2014 Q3

New York Stock Exchange

Now let’s analyze the new hedge fund action surrounding Hilton Grand Vacations Inc. (NYSE:HGV).

What have hedge funds been doing with Hilton Grand Vacations Inc. (NYSE:HGV)?

At Q4’s end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in HGV a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in Hilton Grand Vacations Inc. (NYSE:HGV) was held by Zimmer Partners, which reported holding $214.6 million worth of stock at the end of September. It was followed by P2 Capital Partners with a $154.8 million position. Other investors bullish on the company included Centerbridge Partners, Long Pond Capital, and Rima Senvest Management. In terms of the portfolio weights assigned to each position Centerbridge Partners allocated the biggest weight to Hilton Grand Vacations Inc. (NYSE:HGV), around 22.83% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, earmarking 11.35 percent of its 13F equity portfolio to HGV.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Melqart Asset Management, managed by Michel Massoud, created the largest position in Hilton Grand Vacations Inc. (NYSE:HGV). Melqart Asset Management had $32.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $8.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Asad Rahman and Aman Kapadia’s Akaris Global Partners, Avi Fruchter’s Anavon Capital, and Mark Coe’s Intrinsic Edge Capital.

Let’s also examine hedge fund activity in other stocks similar to Hilton Grand Vacations Inc. (NYSE:HGV). We will take a look at Cannae Holdings, Inc. (NYSE:CNNE), Element Solutions Inc (NYSE:ESI), Columbia Banking System Inc (NASDAQ:COLB), and South State Corporation (NASDAQ:SSB). All of these stocks’ market caps are similar to HGV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNNE 31 376691 12
ESI 37 736292 9
COLB 10 108526 1
SSB 15 63154 -3
Average 23.25 321166 4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $1039 million in HGV’s case. Element Solutions Inc (NYSE:ESI) is the most popular stock in this table. On the other hand Columbia Banking System Inc (NASDAQ:COLB) is the least popular one with only 10 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 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 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately HGV wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HGV were disappointed as the stock returned -44.8% during the four months of 2020 (through May 1st) 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.