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

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. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Hilton Worldwide Holdings Inc (NYSE:HLT) in this article.

Hilton Worldwide Holdings Inc (NYSE:HLT) was in 57 hedge funds’ portfolios at the end of the fourth quarter of 2019. HLT has experienced an increase in support from the world’s most elite money managers in recent months. There were 53 hedge funds in our database with HLT positions at the end of the previous quarter. Our calculations also showed that HLT 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 shareholders, hedge funds are viewed as worthless, old financial tools of years past. While there are over 8000 funds trading today, Our experts hone in on the bigwigs of this club, about 850 funds. Most estimates calculate that this group of people have their hands on the majority of the smart money’s total asset base, and by observing their top stock picks, Insider Monkey has figured out many investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Can hedge funds beat the market

Bill Ackman of Pershing Square

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. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. 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. With all of this in mind let’s take a glance at the key hedge fund action surrounding Hilton Worldwide Holdings Inc (NYSE:HLT).

What does smart money think about Hilton Worldwide Holdings Inc (NYSE:HLT)?

Heading into the first quarter of 2020, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 47 hedge funds with a bullish position in HLT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Pershing Square, managed by Bill Ackman, holds the most valuable position in Hilton Worldwide Holdings Inc (NYSE:HLT). Pershing Square has a $1.1709 billion position in the stock, comprising 17.9% of its 13F portfolio. The second largest stake is held by D1 Capital Partners, led by Daniel Sundheim, holding a $688.8 million position; the fund has 10.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Boykin Curry’s Eagle Capital Management, Ross Turner’s Pelham Capital and Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to Hilton Worldwide Holdings Inc (NYSE:HLT), around 27.51% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, earmarking 17.87 percent of its 13F equity portfolio to HLT.

Now, key hedge funds were leading the bulls’ herd. Point State Capital, managed by Zach Schreiber, created the largest position in Hilton Worldwide Holdings Inc (NYSE:HLT). Point State Capital had $90.7 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $17.2 million investment in the stock during the quarter. The other funds with brand new HLT positions are David Harding’s Winton Capital Management, Ray Dalio’s Bridgewater Associates, and Clint Carlson’s Carlson Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Hilton Worldwide Holdings Inc (NYSE:HLT) but similarly valued. These stocks are ONEOK, Inc. (NYSE:OKE), Zimmer Biomet Holdings Inc (NYSE:ZBH), The Hershey Company (NYSE:HSY), and Yum! Brands, Inc. (NYSE:YUM). This group of stocks’ market caps are similar to HLT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OKE 31 223513 5
ZBH 64 1443573 15
HSY 39 901147 3
YUM 36 462690 -3
Average 42.5 757731 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $758 million. That figure was $4450 million in HLT’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand ONEOK, Inc. (NYSE:OKE) is the least popular one with only 31 bullish hedge fund positions. Hilton Worldwide Holdings Inc (NYSE:HLT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 but beat the market by 11 percentage points. Unfortunately HLT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HLT were disappointed as the stock returned -34.7% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.