Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Sunstone Hotel Investors Inc (NYSE:SHO).
Sunstone Hotel Investors Inc (NYSE:SHO) was in 23 hedge funds’ portfolios at the end of September. The all time high for this statistic is 25. SHO shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. There were 18 hedge funds in our database with SHO holdings at the end of June. Our calculations also showed that SHO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Ken Heebner of Capital Growth Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s go over the latest hedge fund action regarding Sunstone Hotel Investors Inc (NYSE:SHO).
Do Hedge Funds Think SHO Is A Good Stock To Buy Now?
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in SHO over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Zimmer Partners held the most valuable stake in Sunstone Hotel Investors Inc (NYSE:SHO), which was worth $25.7 million at the end of the third quarter. On the second spot was Capital Growth Management which amassed $22.9 million worth of shares. AltraVue Capital, Balyasny Asset Management, and Waterfront Capital Partners 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 AltraVue Capital allocated the biggest weight to Sunstone Hotel Investors Inc (NYSE:SHO), around 2.88% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, designating 2.1 percent of its 13F equity portfolio to SHO.
Now, specific money managers have been driving this bullishness. Zimmer Partners, managed by Stuart J. Zimmer, created the most valuable position in Sunstone Hotel Investors Inc (NYSE:SHO). Zimmer Partners had $25.7 million invested in the company at the end of the quarter. Daniel Johnson’s Gillson Capital also initiated a $7.1 million position during the quarter. The following funds were also among the new SHO investors: Mark Coe’s Intrinsic Edge Capital, Michael Gelband’s ExodusPoint Capital, and Renaissance Technologies.
Let’s go over hedge fund activity in other stocks similar to Sunstone Hotel Investors Inc (NYSE:SHO). We will take a look at Belden Inc. (NYSE:BDC), SAGE Therapeutics Inc (NASDAQ:SAGE), Comfort Systems USA, Inc. (NYSE:FIX), Intercorp Financial Services Inc. (NYSE:IFS), Grupo Aeroportuario del Centro Nort (NASDAQ:OMAB), Erasca Inc. (NASDAQ:ERAS), and BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX). This group of stocks’ market values match SHO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BDC | 17 | 172826 | 2 |
| SAGE | 22 | 234535 | -5 |
| FIX | 19 | 60926 | -5 |
| IFS | 5 | 29773 | 1 |
| OMAB | 6 | 19026 | 2 |
| ERAS | 12 | 506231 | 12 |
| BCRX | 20 | 420526 | -5 |
| Average | 14.4 | 206263 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $137 million in SHO’s case. SAGE Therapeutics Inc (NASDAQ:SAGE) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Sunstone Hotel Investors Inc (NYSE:SHO) is more popular among hedge funds. Our overall hedge fund sentiment score for SHO is 87.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Unfortunately SHO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SHO were disappointed as the stock returned -1.9% since the end of the third quarter (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Sunstone Hotel Investors Inc. (NYSE:SHO)
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Disclosure: None. This article was originally published at Insider Monkey.
