Were These Hedge Funds Right About Betting On Wyndham Hotels & Resorts, Inc. (WH)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Wyndham Hotels & Resorts, Inc. (NYSE:WH) changed recently.

Is Wyndham Hotels & Resorts, Inc. (NYSE:WH) a buy, sell, or hold? The best stock pickers were getting more optimistic. The number of long hedge fund positions moved up by 5 recently. Wyndham Hotels & Resorts, Inc. (NYSE:WH) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistics is 44. Our calculations also showed that WH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 31 hedge funds in our database with WH holdings at the end of March.

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

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Gates of Gates Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to review the fresh hedge fund action encompassing Wyndham Hotels & Resorts, Inc. (NYSE:WH).

Hedge fund activity in Wyndham Hotels & Resorts, Inc. (NYSE:WH)

At Q2’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in WH 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.

More specifically, Long Pond Capital was the largest shareholder of Wyndham Hotels & Resorts, Inc. (NYSE:WH), with a stake worth $94.5 million reported as of the end of June. Trailing Long Pond Capital was Citadel Investment Group, which amassed a stake valued at $84.7 million. Gates Capital Management, Tremblant Capital, and Echo Street Capital 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 Solel Partners allocated the biggest weight to Wyndham Hotels & Resorts, Inc. (NYSE:WH), around 12.68% of its 13F portfolio. Impactive Capital is also relatively very bullish on the stock, dishing out 11.02 percent of its 13F equity portfolio to WH.

Now, specific money managers have jumped into Wyndham Hotels & Resorts, Inc. (NYSE:WH) headfirst. Scopus Asset Management, managed by Alexander Mitchell, established the most outsized position in Wyndham Hotels & Resorts, Inc. (NYSE:WH). Scopus Asset Management had $32 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $29.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Josh Resnick’s Jericho Capital Asset Management, and Renaissance Technologies.

Let’s go over hedge fund activity in other stocks similar to Wyndham Hotels & Resorts, Inc. (NYSE:WH). We will take a look at Huntsman Corporation (NYSE:HUN), Qurate Retail, Inc. (NASDAQ:QRTEA), BridgeBio Pharma, Inc. (NASDAQ:BBIO), Healthcare Realty Trust Inc (NYSE:HR), JBG SMITH Properties (NYSE:JBGS), Eldorado Resorts Inc (NASDAQ:ERI), and Hawaiian Electric Industries, Inc. (NYSE:HE). All of these stocks’ market caps resemble WH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HUN 25 354992 4
QRTEA 43 743396 11
BBIO 14 1341110 2
HR 22 155771 11
JBGS 25 283097 5
ERI 49 733973 10
HE 16 159237 3
Average 27.7 538797 6.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $760 million in WH’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand BridgeBio Pharma, Inc. (NASDAQ:BBIO) is the least popular one with only 14 bullish hedge fund positions. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WH is 66. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on WH, though not to the same extent, as the stock returned 9.3% since Q2 (through October 30th) and outperformed the market as well.

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