Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Xenia Hotels & Resorts Inc (NYSE:XHR).
Xenia Hotels & Resorts Inc (NYSE:XHR) experienced an increase in activity from the world’s largest hedge funds. There were 16 funds in our database bullish on XHR at the end of September. At the end of this article we will also compare XHR to other stocks including Stamps.com Inc. (NASDAQ:STMP), Descartes Systems Group (USA) (NASDAQ:DSGX), and Corrections Corp Of America (NYSE:CXW) to get a better sense of its popularity.
Follow Xenia Hotels & Resorts Inc. (NYSE:XHR)
Follow Xenia Hotels & Resorts Inc. (NYSE:XHR)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s take a peek at the latest action regarding Xenia Hotels & Resorts Inc (NYSE:XHR).
How are hedge funds trading Xenia Hotels & Resorts Inc (NYSE:XHR)?
Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, compared to 11 funds at the end of June. On the other hand, there were a total of 12 hedge funds with a bullish position in XHR at the beginning of this year. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Seth Fischer’s Oasis Managementá has the most valuable position in Xenia Hotels & Resorts Inc (NYSE:XHR), worth close to $15.2 million, corresponding to 6.2% of its total 13F portfolio. On Oasis Managementá’s heels is 683 Capital Partners, led by Ari Zweiman, which holds a $13.5 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish comprise Paul Reeder and Edward Shapiro’s PAR Capital Management, David Brown’s Hawk Ridge Management, and Charles Davidson’s Wexford Capital. We should note that 683 Capital Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, led by Dmitry Balyasny, created the most valuable position in Xenia Hotels & Resorts Inc (NYSE:XHR). Balyasny Asset Management had $5.5 million invested in the company at the end of the quarter. Steve Pei’s Gratia Capital also made a $3.5 million investment in the stock during the quarter. The other funds with brand new XHR positions are Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group, and David Costen Haley’s HBK Investments.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Xenia Hotels & Resorts Inc (NYSE:XHR) but similarly valued. These stocks are Stamps.com Inc. (NASDAQ:STMP), Descartes Systems Group (USA) (NASDAQ:DSGX), Corrections Corp Of America (NYSE:CXW), and World Wrestling Entertainment, Inc. (NYSE:WWE). This group of stocks’ market values match XHR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STMP | 31 | 415305 | 4 |
| DSGX | 4 | 25628 | 0 |
| CXW | 27 | 186592 | 12 |
| WWE | 13 | 141372 | 3 |
As you can see these stocks had an average of 19 funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $78 million in XHR’s case. Stamps.com Inc. (NASDAQ:STMP) is the most popular stock in this table. On the other hand Descartes Systems Group (USA) (NASDAQ:DSGX) is the least popular one with only four funds holding shares. 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. In this regard Stamps.com Inc. (NASDAQ:STMP) might be a better candidate to consider taking a long position in.
Disclosure: none
