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. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. What do these smart investors think about RLJ Lodging Trust (NYSE:RLJ)?
RLJ Lodging Trust (NYSE:RLJ) was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2019. RLJ investors should be aware of a decrease in support from the world’s most elite money managers of late. There were 21 hedge funds in our database with RLJ holdings at the end of the previous quarter. Our calculations also showed that RLJ 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.
Ken Griffin of Citadel Investment Group
With all of this in mind let’s view the fresh hedge fund action regarding RLJ Lodging Trust (NYSE:RLJ).
Hedge fund activity in RLJ Lodging Trust (NYSE:RLJ)
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the third quarter of 2019. By comparison, 25 hedge funds held shares or bullish call options in RLJ 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, Citadel Investment Group was the largest shareholder of RLJ Lodging Trust (NYSE:RLJ), with a stake worth $39.3 million reported as of the end of September. Trailing Citadel Investment Group was Fisher Asset Management, which amassed a stake valued at $39.1 million. Forward Management, Kettle Hill Capital Management, and Renaissance Technologies 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 Kettle Hill Capital Management allocated the biggest weight to RLJ Lodging Trust (NYSE:RLJ), around 2.82% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, setting aside 2.45 percent of its 13F equity portfolio to RLJ.
Seeing as RLJ Lodging Trust (NYSE:RLJ) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of money managers that slashed their entire stakes last quarter. At the top of the heap, Richard Driehaus’s Driehaus Capital sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $4.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $2.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as RLJ Lodging Trust (NYSE:RLJ) but similarly valued. We will take a look at Navient Corp (NASDAQ:NAVI), CVB Financial Corp. (NASDAQ:CVBF), Cantel Medical Corp. (NYSE:CMD), and YETI Holdings, Inc. (NYSE:YETI). This group of stocks’ market valuations match RLJ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NAVI | 38 | 513271 | 5 |
| CVBF | 14 | 47079 | 0 |
| CMD | 11 | 103149 | -2 |
| YETI | 17 | 146486 | 6 |
| Average | 20 | 202496 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $132 million in RLJ’s case. Navient Corp (NASDAQ:NAVI) is the most popular stock in this table. On the other hand Cantel Medical Corp. (NYSE:CMD) is the least popular one with only 11 bullish hedge fund positions. RLJ Lodging Trust (NYSE:RLJ) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 RLJ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RLJ investors were disappointed as the stock returned -54.5% 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 most of these stocks already outperformed the market 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.
