Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Apple Hospitality REIT Inc (NYSE:APLE).
Apple Hospitality REIT Inc (NYSE:APLE) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Our calculations also showed that APLE isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s check out the fresh hedge fund action regarding Apple Hospitality REIT Inc (NYSE:APLE).
Hedge fund activity in Apple Hospitality REIT Inc (NYSE:APLE)
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in APLE over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Apple Hospitality REIT Inc (NYSE:APLE), with a stake worth $42.3 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $18.4 million. Forward Management, Balyasny Asset Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Apple Hospitality REIT Inc (NYSE:APLE) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of fund managers who were dropping their entire stakes last quarter. It’s worth mentioning that Jonathan Barrett and Paul Segal’s Luminus Management dropped the largest stake of the 700 funds tracked by Insider Monkey, totaling an estimated $1.1 million in stock. George Hall’s fund, Clinton Group, also dumped its stock, about $1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Apple Hospitality REIT Inc (NYSE:APLE). We will take a look at Companhia de Saneamento Basico (NYSE:SBS), International Game Technology PLC (NYSE:IGT), Penske Automotive Group, Inc. (NYSE:PAG), and Clean Harbors Inc (NYSE:CLH). This group of stocks’ market caps resemble APLE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBS | 11 | 156926 | 1 |
| IGT | 37 | 963167 | 2 |
| PAG | 20 | 94346 | 3 |
| CLH | 18 | 238648 | 5 |
| Average | 21.5 | 363272 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $363 million. That figure was $95 million in APLE’s case. International Game Technology PLC (NYSE:IGT) is the most popular stock in this table. On the other hand Companhia de Saneamento Basico (NYSE:SBS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Apple Hospitality REIT Inc (NYSE:APLE) is even less popular than SBS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
