We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Pebblebrook Hotel Trust (NYSE:PEB).
Is Pebblebrook Hotel Trust (NYSE:PEB) a buy, sell, or hold? Hedge funds are becoming hopeful. The number of long hedge fund bets rose by 9 in recent months. Our calculations also showed that PEB 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). PEB was in 22 hedge funds’ portfolios at the end of December. There were 13 hedge funds in our database with PEB positions at the end of the previous quarter.
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.
Parag Vora of HG Vora Capital 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. With all of this in mind let’s take a look at the latest hedge fund action regarding Pebblebrook Hotel Trust (NYSE:PEB).
How have hedgies been trading Pebblebrook Hotel Trust (NYSE:PEB)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 69% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in PEB 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.
More specifically, HG Vora Capital Management was the largest shareholder of Pebblebrook Hotel Trust (NYSE:PEB), with a stake worth $75.1 million reported as of the end of September. Trailing HG Vora Capital Management was Long Pond Capital, which amassed a stake valued at $56.6 million. Echo Street Capital Management, Renaissance Technologies, and Citadel Investment Group 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 HG Vora Capital Management allocated the biggest weight to Pebblebrook Hotel Trust (NYSE:PEB), around 7.04% of its 13F portfolio. Hill Winds Capital is also relatively very bullish on the stock, setting aside 1.54 percent of its 13F equity portfolio to PEB.
As industrywide interest jumped, some big names were leading the bulls’ herd. Long Pond Capital, managed by John Khoury, initiated the largest position in Pebblebrook Hotel Trust (NYSE:PEB). Long Pond Capital had $56.6 million invested in the company at the end of the quarter. Matthew Crandall Gilman’s Hill Winds Capital also made a $2.3 million investment in the stock during the quarter. The following funds were also among the new PEB investors: Steve Cohen’s Point72 Asset Management, Benjamin A. Smith’s Laurion Capital Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Pebblebrook Hotel Trust (NYSE:PEB). These stocks are Semtech Corporation (NASDAQ:SMTC), TerraForm Power Inc (NASDAQ:TERP), Strayer Education Inc (NASDAQ:STRA), and Iovance Biotherapeutics, Inc. (NASDAQ:IOVA). All of these stocks’ market caps match PEB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMTC | 12 | 199266 | -5 |
| TERP | 15 | 215703 | 2 |
| STRA | 13 | 273742 | -8 |
| IOVA | 32 | 1333013 | 1 |
| Average | 18 | 505431 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $505 million. That figure was $216 million in PEB’s case. Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) is the most popular stock in this table. On the other hand Semtech Corporation (NASDAQ:SMTC) is the least popular one with only 12 bullish hedge fund positions. Pebblebrook Hotel Trust (NYSE:PEB) 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately PEB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PEB were disappointed as the stock returned -60.5% 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.
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.
