“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards GreenTree Hospitality Group Ltd. (NYSE:GHG).
Is GreenTree Hospitality Group Ltd. (NYSE:GHG) going to take off soon? Investors who are in the know are taking an optimistic view. The number of long hedge fund bets advanced by 2 lately. Our calculations also showed that GHG 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Tim David of Guardian Point Capital
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. Let’s take a look at the key hedge fund action encompassing GreenTree Hospitality Group Ltd. (NYSE:GHG).
Hedge fund activity in GreenTree Hospitality Group Ltd. (NYSE:GHG)
Heading into the fourth quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GHG over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Sylebra Capital Management was the largest shareholder of GreenTree Hospitality Group Ltd. (NYSE:GHG), with a stake worth $9.2 million reported as of the end of September. Trailing Sylebra Capital Management was Dalton Investments, which amassed a stake valued at $6.7 million. Guardian Point Capital, Renaissance Technologies, and Two Sigma Advisors 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 Dalton Investments allocated the biggest weight to GreenTree Hospitality Group Ltd. (NYSE:GHG), around 4.2% of its 13F portfolio. Guardian Point Capital is also relatively very bullish on the stock, earmarking 1.3 percent of its 13F equity portfolio to GHG.
As industrywide interest jumped, some big names have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in GreenTree Hospitality Group Ltd. (NYSE:GHG). Balyasny Asset Management had $0.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $0.2 million investment in the stock during the quarter.
Let’s now review hedge fund activity in other stocks similar to GreenTree Hospitality Group Ltd. (NYSE:GHG). We will take a look at HEXO Corp. (NYSE:HEXO), Cryolife Inc (NYSE:CRY), Douglas Dynamics Inc (NYSE:PLOW), and PC Connection, Inc. (NASDAQ:CNXN). This group of stocks’ market values are similar to GHG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HEXO | 7 | 9359 | 0 |
| CRY | 8 | 20061 | -7 |
| PLOW | 10 | 19937 | 3 |
| CNXN | 11 | 50307 | 3 |
| Average | 9 | 24916 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $24 million in GHG’s case. PC Connection, Inc. (NASDAQ:CNXN) is the most popular stock in this table. On the other hand HEXO Corp. (NYSE:HEXO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks GreenTree Hospitality Group Ltd. (NYSE:GHG) is even less popular than HEXO. Hedge funds dodged a bullet by taking a bearish stance towards GHG. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GHG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GHG investors were disappointed as the stock returned 1.1% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
