Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish 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.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Hilton Worldwide Holdings Inc (NYSE:HLT).
Hilton Worldwide Holdings Inc (NYSE:HLT) has seen an increase in hedge fund sentiment in recent months. Our calculations also showed that HLT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Daniel Sundheim of D1 Capital Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s go over the key hedge fund action regarding Hilton Worldwide Holdings Inc (NYSE:HLT).
What does smart money think about Hilton Worldwide Holdings Inc (NYSE:HLT)?
At Q4’s end, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the third quarter of 2019. By comparison, 47 hedge funds held shares or bullish call options in HLT a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Pershing Square was the largest shareholder of Hilton Worldwide Holdings Inc (NYSE:HLT), with a stake worth $1170.9 million reported as of the end of September. Trailing Pershing Square was D1 Capital Partners, which amassed a stake valued at $688.8 million. Eagle Capital Management, Pelham Capital, and Soroban 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 Pelham Capital allocated the biggest weight to Hilton Worldwide Holdings Inc (NYSE:HLT), around 27.51% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, earmarking 17.87 percent of its 13F equity portfolio to HLT.
As industrywide interest jumped, key hedge funds have jumped into Hilton Worldwide Holdings Inc (NYSE:HLT) headfirst. Point State Capital, managed by Zach Schreiber, created the most outsized position in Hilton Worldwide Holdings Inc (NYSE:HLT). Point State Capital had $90.7 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $17.2 million investment in the stock during the quarter. The other funds with brand new HLT positions are David Harding’s Winton Capital Management, Ray Dalio’s Bridgewater Associates, and Clint Carlson’s Carlson Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hilton Worldwide Holdings Inc (NYSE:HLT) but similarly valued. We will take a look at ONEOK, Inc. (NYSE:OKE), Zimmer Biomet Holdings Inc (NYSE:ZBH), The Hershey Company (NYSE:HSY), and Yum! Brands, Inc. (NYSE:YUM). This group of stocks’ market caps are closest to HLT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OKE | 31 | 223513 | 5 |
| ZBH | 64 | 1443573 | 15 |
| HSY | 39 | 901147 | 3 |
| YUM | 36 | 462690 | -3 |
| Average | 42.5 | 757731 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $758 million. That figure was $4450 million in HLT’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand ONEOK, Inc. (NYSE:OKE) is the least popular one with only 31 bullish hedge fund positions. Hilton Worldwide Holdings Inc (NYSE:HLT) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but beat the market by 1.9 percentage points. Unfortunately HLT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HLT were disappointed as the stock returned -22.2% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
