Hedge Funds Are Taking A Trip Away From Starwood Hotels & Resorts Worldwide, Inc (HOT)

Concerns over a shift in the Fed’s easy monetary policy hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, the Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25 and October 30. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller-cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) during this rough time.

Starwood Hotels & Resorts Worldwide, Inc investors should pay attention to a decrease in hedge fund sentiment lately. HOT was in 47 hedge funds’ portfolios at the end of the third quarter of 2015. There were 62 hedge funds in our database with HOT holdings at the end of the previous quarter. At the end of this article we will also compare HOT to other stocks including Whole Foods Market, Inc. (NASDAQ:WFM), Harley-Davidson, Inc. (NYSE:HOG), and POSCO (ADR) (NYSE:PKX) to get a better sense of its popularity.

In today’s marketplace there are a large number of methods shareholders put to use to analyze publicly traded companies. A pair of the most underrated methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite money managers can trounce the market by a very impressive margin (see the details here).

Now, let’s take a look at the recent action surrounding Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT).

Hedge fund activity in Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT)

At the end of the third quarter, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 24% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or had already accumulated large positions).

According to Insider Monkey’s hedge fund database, John Paulson’s Paulson & Co has the biggest position in Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT), worth close to $1.04 billion, amounting to 5.4% of its total 13F portfolio. Sitting in the number 2 spot is OZ Management, led by Daniel S. Och, holding a $747.1 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Andreas Halvorsen’s Viking Global, Ken Griffin’s Citadel Investment Group, and Jonathon Jacobson’s Highfields Capital Management.

Judging by the fact that Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) has experienced a large declination in interest from the smart money, logic holds that there were a few hedge funds that decided to sell off their full holdings in the third quarter. Intriguingly, OZ Management said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $169.3 million of call options underlying shares, though as mentioned, the firm still holds a large long position. Dan Loeb’s fund, Third Point, also said goodbye to its stock, about $81.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 15 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT). We will take a look at Whole Foods Market, Inc. (NASDAQ:WFM), Harley-Davidson, Inc. (NYSE:HOG), POSCO (ADR) (NYSE:PKX), and Discovery Communications Inc. (NASDAQ:DISCA). This group of stocks’ market valuations resemble HOT’s market valuation.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $3.61 billion in HOT’s case. Whole Foods Market, Inc. (NASDAQ:WFM) is the most popular stock in this table. On the other hand POSCO (ADR) (NYSE:PKX) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) is more popular among hedge funds and has far more money invested in it. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio despite the large decrease in smart money ownership during Q3.