Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Chatham Lodging Trust (NYSE:CLDT) based on that data.
Hedge fund interest in Chatham Lodging Trust (NYSE:CLDT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cara Therapeutics Inc (NASDAQ:CARA), SP Plus Corp (NASDAQ:SP), and Stoneridge, Inc. (NYSE:SRI) to gather more data points. Our calculations also showed that CLDT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the key hedge fund action surrounding Chatham Lodging Trust (NYSE:CLDT).
How have hedgies been trading Chatham Lodging Trust (NYSE:CLDT)?
Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in CLDT a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Chatham Lodging Trust (NYSE:CLDT), with a stake worth $35.6 million reported as of the end of September. Trailing Renaissance Technologies was Forward Management, which amassed a stake valued at $14 million. Citadel Investment Group, Two Sigma Advisors, and Arrowstreet Capital 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 Forward Management allocated the biggest weight to Chatham Lodging Trust (NYSE:CLDT), around 2.13% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to CLDT.
Seeing as Chatham Lodging Trust (NYSE:CLDT) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that slashed their entire stakes last quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest stake of the 750 funds followed by Insider Monkey, worth an estimated $0.2 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund sold off about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Chatham Lodging Trust (NYSE:CLDT). We will take a look at Cara Therapeutics Inc (NASDAQ:CARA), SP Plus Corp (NASDAQ:SP), Stoneridge, Inc. (NYSE:SRI), and Connecticut Water Service, Inc. (NASDAQ:CTWS). This group of stocks’ market caps match CLDT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CARA | 11 | 104858 | 3 |
| SP | 11 | 99127 | -2 |
| SRI | 15 | 80512 | 0 |
| CTWS | 7 | 34657 | 2 |
| Average | 11 | 79789 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $55 million in CLDT’s case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Connecticut Water Service, Inc. (NASDAQ:CTWS) is the least popular one with only 7 bullish hedge fund positions. Chatham Lodging Trust (NYSE:CLDT) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CLDT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CLDT investors were disappointed as the stock returned 2.1% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
