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 June. 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 Wyndham Hotels & Resorts, Inc. (NYSE:WH), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Wyndham Hotels & Resorts, Inc. (NYSE:WH) has experienced an increase in support from the world’s most elite money managers lately. Our calculations also showed that WH 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).
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Harold Levy of Iridian Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. Keeping this in mind we’re going to check out the key hedge fund action surrounding Wyndham Hotels & Resorts, Inc. (NYSE:WH).
What does smart money think about Wyndham Hotels & Resorts, Inc. (NYSE:WH)?
At the end of the fourth quarter, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. By comparison, 37 hedge funds held shares or bullish call options in WH a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Iridian Asset Management was the largest shareholder of Wyndham Hotels & Resorts, Inc. (NYSE:WH), with a stake worth $103.8 million reported as of the end of September. Trailing Iridian Asset Management was Tremblant Capital, which amassed a stake valued at $88.3 million. Permian Investment Partners, Lakewood Capital Management, and Long Pond Capital 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 20.93% of its 13F portfolio. Permian Investment Partners is also relatively very bullish on the stock, earmarking 20.41 percent of its 13F equity portfolio to WH.
Now, specific money managers were breaking ground themselves. Solel Partners, managed by Craig Peskin and Peter Fleiss, established the largest position in Wyndham Hotels & Resorts, Inc. (NYSE:WH). Solel Partners had $37.3 million invested in the company at the end of the quarter. Lauren Taylor Wolfe’s Impactive Capital also made a $30 million investment in the stock during the quarter. The following funds were also among the new WH investors: Martin Taylor’s Crake Asset Management, Stuart J. Zimmer’s Zimmer Partners, and Stephen Yiu’s Blue Whale Capital.
Let’s also examine hedge fund activity in other stocks similar to Wyndham Hotels & Resorts, Inc. (NYSE:WH). We will take a look at ADT Inc. (NYSE:ADT), MDU Resources Group Inc (NYSE:MDU), Zscaler, Inc. (NASDAQ:ZS), and Kinross Gold Corporation (NYSE:KGC). This group of stocks’ market values are similar to WH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADT | 21 | 193550 | 5 |
| MDU | 30 | 355457 | 7 |
| ZS | 18 | 89966 | -3 |
| KGC | 25 | 448750 | -3 |
| Average | 23.5 | 271931 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $960 million in WH’s case. MDU Resources Group Inc (NYSE:MDU) is the most popular stock in this table. On the other hand Zscaler, Inc. (NASDAQ:ZS) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Wyndham Hotels & Resorts, Inc. (NYSE:WH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately WH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WH were disappointed as the stock returned -46.8% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
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.
