Were Hedge Funds Right About Piling Into Booking Holdings Inc. (BKNG)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Booking Holdings Inc. (NASDAQ:BKNG) based on that data and determine whether they were really smart about the stock.

Booking Holdings Inc. (NASDAQ:BKNG) was in 90 hedge funds’ portfolios at the end of March. BKNG shareholders have witnessed a large increase in hedge fund interest lately. There were 74 hedge funds in our database with BKNG positions at the end of the previous quarter. Our calculations also showed that BKNG ranked 28th among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). It was hedge fund’s #1 travel related stock pick.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the key hedge fund action regarding Booking Holdings Inc. (NASDAQ:BKNG).

What have hedge funds been doing with Booking Holdings Inc. (NASDAQ:BKNG)?

At the end of the first quarter, a total of 90 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from one quarter earlier. On the other hand, there were a total of 77 hedge funds with a bullish position in BKNG a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, PAR Capital Management held the most valuable stake in Booking Holdings Inc. (NASDAQ:BKNG), which was worth $432.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $421.2 million worth of shares. Melvin Capital Management, Yacktman Asset Management, and SRS Investment Management 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 PAR Capital Management allocated the biggest weight to Booking Holdings Inc. (NASDAQ:BKNG), around 18.36% of its 13F portfolio. RIT Capital Partners is also relatively very bullish on the stock, dishing out 17.62 percent of its 13F equity portfolio to BKNG.

As industrywide interest jumped, key money managers were breaking ground themselves. SRS Investment Management, managed by Karthik Sarma, created the most outsized position in Booking Holdings Inc. (NASDAQ:BKNG). SRS Investment Management had $268.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $100.6 million position during the quarter. The other funds with brand new BKNG positions are Panayotis Takis Sparaggis’s Alkeon Capital Management, Renaissance Technologies, and Ricky Sandler’s Eminence Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Booking Holdings Inc. (NASDAQ:BKNG) but similarly valued. We will take a look at Biogen Inc. (NASDAQ:BIIB), The Blackstone Group Inc. (NYSE:BX), ServiceNow Inc (NYSE:NOW), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). This group of stocks’ market values resemble BKNG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BIIB 70 4497544 9
BX 49 1523046 2
NOW 85 3985632 10
REGN 42 838224 5
Average 61.5 2711112 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 61.5 hedge funds with bullish positions and the average amount invested in these stocks was $2711 million. That figure was $4915 million in BKNG’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the least popular one with only 42 bullish hedge fund positions. Compared to these stocks Booking Holdings Inc. (NASDAQ:BKNG) 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 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on BKNG, though not to the same extent, as the stock returned 20.1% in Q2 (through June 25th) and outperformed the market as well.

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