Were Hedge Funds Right About Marriott International (MAR)?

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. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Marriott International Inc (NYSE:MAR), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Marriott International Inc (NYSE:MAR) a cheap stock to buy now? Investors who are in the know are taking a bearish view. The number of bullish hedge fund bets were cut by 8 lately. Our calculations also showed that MAR 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). MAR was in 37 hedge funds’ portfolios at the end of December. There were 45 hedge funds in our database with MAR holdings at the end of the previous quarter.

In today’s marketplace there are several metrics stock traders have at their disposal to size up publicly traded companies. Some of the most innovative metrics are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a very impressive amount (see the details here).


Boykin Curry of Eagle Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 view the new hedge fund action regarding Marriott International Inc (NYSE:MAR).

How have hedgies been trading Marriott International Inc (NYSE:MAR)?

At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in MAR over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MAR A Good Stock To Buy?

Among these funds, Eagle Capital Management held the most valuable stake in Marriott International Inc (NYSE:MAR), which was worth $1426 million at the end of the third quarter. On the second spot was Soroban Capital Partners which amassed $685.7 million worth of shares. Markel Gayner Asset Management, Citadel Investment Group, and Soroban Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Soroban Capital Partners allocated the biggest weight to Marriott International Inc (NYSE:MAR), around 8.99% of its 13F portfolio. Steel Canyon Capital is also relatively very bullish on the stock, designating 5.73 percent of its 13F equity portfolio to MAR.

Because Marriott International Inc (NYSE:MAR) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds that decided to sell off their positions entirely in the third quarter. At the top of the heap, Nicolai Tangen’s Ako Capital dropped the largest investment of all the hedgies followed by Insider Monkey, worth about $155.9 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $64.6 million worth. These moves are important to note, as aggregate hedge fund interest fell by 8 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Marriott International Inc (NYSE:MAR). These stocks are Phillips 66 (NYSE:PSX), Relx PLC (NYSE:RELX), ICICI Bank Limited (NYSE:IBN), and Illumina, Inc. (NASDAQ:ILMN). This group of stocks’ market valuations match MAR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSX 46 944856 10
RELX 7 99457 1
IBN 29 1107865 1
ILMN 43 1121339 3
Average 31.25 818379 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $818 million. That figure was $2944 million in MAR’s case. Phillips 66 (NYSE:PSX) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 7 bullish hedge fund positions. Marriott International Inc (NYSE:MAR) 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 gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately MAR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MAR were disappointed as the stock returned -43.8% 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.