Did Hedge Funds Make The Right Call On Tripadvisor Inc (TRIP) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtTripadvisor Inc (NASDAQ:TRIP) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Tripadvisor Inc (NASDAQ:TRIP) shareholders have witnessed a decrease in enthusiasm from smart money lately. TRIP was in 30 hedge funds’ portfolios at the end of March. There were 39 hedge funds in our database with TRIP holdings at the end of the previous quarter. Our calculations also showed that TRIP isn’t 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).

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.

Paul Reeder of PAR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now let’s take a look at the key hedge fund action regarding Tripadvisor Inc (NASDAQ:TRIP).

Hedge fund activity in Tripadvisor Inc (NASDAQ:TRIP)

Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TRIP over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, Eagle Capital Management was the largest shareholder of Tripadvisor Inc (NASDAQ:TRIP), with a stake worth $147.6 million reported as of the end of September. Trailing Eagle Capital Management was Renaissance Technologies, which amassed a stake valued at $71.4 million. PAR Capital Management, Arrowstreet Capital, and AQR 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 Raging Capital Management allocated the biggest weight to Tripadvisor Inc (NASDAQ:TRIP), around 3.36% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, dishing out 2.49 percent of its 13F equity portfolio to TRIP.

Since Tripadvisor Inc (NASDAQ:TRIP) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds who were dropping their positions entirely heading into Q4. Interestingly, Brian Bares’s Bares Capital Management sold off the biggest position of the 750 funds tracked by Insider Monkey, comprising about $20.7 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also cut its stock, about $3.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 9 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Tripadvisor Inc (NASDAQ:TRIP). These stocks are Tegna Inc (NYSE:TGNA), Parsley Energy Inc (NYSE:PE), FireEye Inc (NASDAQ:FEYE), and BRF SA (NYSE:BRFS). This group of stocks’ market valuations resemble TRIP’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $252 million. That figure was $492 million in TRIP’s case. Parsley Energy Inc (NYSE:PE) is the most popular stock in this table. On the other hand BRF SA (NYSE:BRFS) is the least popular one with only 14 bullish hedge fund positions. Tripadvisor Inc (NASDAQ:TRIP) 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 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately TRIP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TRIP investors were disappointed as the stock returned 9.3% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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