Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. Keeping this in mind, let’s analyze whether Xenia Hotels & Resorts Inc (NYSE:XHR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Xenia Hotels & Resorts Inc (NYSE:XHR) has experienced an increase in hedge fund interest of late. Our calculations also showed that XHR 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).
In the eyes of most traders, hedge funds are viewed as underperforming, old investment tools of yesteryear. While there are more than 8000 funds in operation at present, Our experts look at the crème de la crème of this group, around 850 funds. These money managers shepherd the majority of all hedge funds’ total asset base, and by observing their top investments, Insider Monkey has identified a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year 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 .
Richard Driehaus of Driehaus 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 we’re going to check out the recent hedge fund action surrounding Xenia Hotels & Resorts Inc (NYSE:XHR).
How are hedge funds trading Xenia Hotels & Resorts Inc (NYSE:XHR)?
At Q4’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in XHR a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Balyasny Asset Management held the most valuable stake in Xenia Hotels & Resorts Inc (NYSE:XHR), which was worth $21.7 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $6.6 million worth of shares. Renaissance Technologies, Driehaus Capital, and Two Sigma Advisors 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 Balyasny Asset Management allocated the biggest weight to Xenia Hotels & Resorts Inc (NYSE:XHR), around 0.13% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to XHR.
As one would reasonably expect, specific money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, created the biggest position in Xenia Hotels & Resorts Inc (NYSE:XHR). Balyasny Asset Management had $21.7 million invested in the company at the end of the quarter. Minhua Zhang’s Weld Capital Management also made a $0.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s go over hedge fund activity in other stocks similar to Xenia Hotels & Resorts Inc (NYSE:XHR). We will take a look at Afya Limited (NASDAQ:AFYA), Arco Platform Limited (NASDAQ:ARCE), The Ensign Group, Inc. (NASDAQ:ENSG), and Saia Inc (NASDAQ:SAIA). This group of stocks’ market valuations are similar to XHR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AFYA | 9 | 55035 | 2 |
| ARCE | 17 | 169461 | 5 |
| ENSG | 15 | 126763 | -3 |
| SAIA | 17 | 86146 | 1 |
| Average | 14.5 | 109351 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $46 million in XHR’s case. Arco Platform Limited (NASDAQ:ARCE) is the most popular stock in this table. On the other hand Afya Limited (NASDAQ:AFYA) is the least popular one with only 9 bullish hedge fund positions. Xenia Hotels & Resorts Inc (NYSE:XHR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately XHR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); XHR investors were disappointed as the stock returned -58.5% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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.
