We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Expedia Inc (NASDAQ:EXPE).
Expedia Inc (NASDAQ:EXPE) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds’ portfolios at the end of the third quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fifth Third Bancorp (NASDAQ:FITB), Twenty-First Century Fox Inc (NASDAQ:FOX), and Twenty-First Century Fox Inc (NASDAQ:FOXA) to gather more data points. Our calculations also showed that EXPE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Reeder of PAR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s check out the recent hedge fund action encompassing Expedia Inc (NASDAQ:EXPE).
How are hedge funds trading Expedia Inc (NASDAQ:EXPE)?
Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 37 hedge funds held shares or bullish call options in EXPE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Expedia Inc (NASDAQ:EXPE) was held by PAR Capital Management, which reported holding $1281.5 million worth of stock at the end of September. It was followed by Altimeter Capital Management with a $457 million position. Other investors bullish on the company included Renaissance Technologies, GLG Partners, and Polar Capital. In terms of the portfolio weights assigned to each position PAR Capital Management allocated the biggest weight to Expedia Inc (NASDAQ:EXPE), around 22.19% of its 13F portfolio. Altimeter Capital Management is also relatively very bullish on the stock, earmarking 11.15 percent of its 13F equity portfolio to EXPE.
Because Expedia Inc (NASDAQ:EXPE) has faced bearish sentiment from the smart money, we can see that there lies a certain “tier” of hedge funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management cut the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $39.7 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund cut about $13.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Expedia Inc (NASDAQ:EXPE). We will take a look at Fifth Third Bancorp (NASDAQ:FITB), Twenty-First Century Fox Inc (NASDAQ:FOX), Twenty-First Century Fox Inc (NASDAQ:FOXA), and Rogers Communications Inc. (NYSE:RCI). All of these stocks’ market caps are similar to EXPE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FITB | 34 | 1027583 | 5 |
| FOX | 27 | 849332 | -3 |
| FOXA | 48 | 2457821 | -12 |
| RCI | 21 | 440152 | 7 |
| Average | 32.5 | 1193722 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1194 million. That figure was $2622 million in EXPE’s case. Twenty-First Century Fox Inc (NASDAQ:FOXA) is the most popular stock in this table. On the other hand Rogers Communications Inc. (NYSE:RCI) is the least popular one with only 21 bullish hedge fund positions. Expedia Inc (NASDAQ:EXPE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately EXPE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EXPE were disappointed as the stock returned -3% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year.
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.
