Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Park Hotels & Resorts Inc. (NYSE:PK).
Park Hotels & Resorts Inc. (NYSE:PK) has seen a decrease in hedge fund sentiment of late. PK was in 13 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with PK holdings at the end of the previous quarter. Our calculations also showed that PK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Mason Hawkins of Southeastern Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Park Hotels & Resorts Inc. (NYSE:PK).
How have hedgies been trading Park Hotels & Resorts Inc. (NYSE:PK)?
At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in PK a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Southeastern Asset Management held the most valuable stake in Park Hotels & Resorts Inc. (NYSE:PK), which was worth $299.9 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $12.8 million worth of shares. Ancora Advisors, Winton Capital Management, and Echo Street 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 Southeastern Asset Management allocated the biggest weight to Park Hotels & Resorts Inc. (NYSE:PK), around 5% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, designating 3.66 percent of its 13F equity portfolio to PK.
Due to the fact that Park Hotels & Resorts Inc. (NYSE:PK) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers that elected to cut their entire stakes last quarter. Interestingly, Israel Englander’s Millennium Management dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $25.4 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $23 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Park Hotels & Resorts Inc. (NYSE:PK). We will take a look at BOK Financial Corporation (NASDAQ:BOKF), Hexcel Corporation (NYSE:HXL), Sonoco Products Company (NYSE:SON), and Syneos Health, Inc. (NASDAQ:SYNH). This group of stocks’ market valuations resemble PK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BOKF | 15 | 205931 | -2 |
| HXL | 30 | 103264 | 3 |
| SON | 24 | 112367 | 0 |
| SYNH | 20 | 185269 | -1 |
| Average | 22.25 | 151708 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $353 million in PK’s case. Hexcel Corporation (NYSE:HXL) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Park Hotels & Resorts Inc. (NYSE:PK) is even less popular than BOKF. Hedge funds dodged a bullet by taking a bearish stance towards PK. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. Unfortunately PK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PK investors were disappointed as the stock returned -65.4% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
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.
