With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Hilton Worldwide Holdings Inc (NYSE:HLT).
Is Hilton Worldwide Holdings Inc (NYSE:HLT) a marvelous stock to buy now? Prominent investors were becoming less confident. The number of bullish hedge fund bets decreased by 2 in recent months. Hilton Worldwide Holdings Inc (NYSE:HLT) was in 45 hedge funds’ portfolios at the end of June. The all time high for this statistic is 60. Our calculations also showed that HLT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 47 hedge funds in our database with HLT positions at the end of the first quarter.
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 S&P 500 ETFs by 79 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 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.
Boykin Curry of Eagle Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to view the new hedge fund action surrounding Hilton Worldwide Holdings Inc (NYSE:HLT).
Do Hedge Funds Think HLT Is A Good Stock To Buy Now?
At second quarter’s end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HLT over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Pershing Square held the most valuable stake in Hilton Worldwide Holdings Inc (NYSE:HLT), which was worth $1539.1 million at the end of the second quarter. On the second spot was Eagle Capital Management which amassed $945.1 million worth of shares. Arrowstreet Capital, Alkeon Capital Management, and Farallon 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 Pershing Square allocated the biggest weight to Hilton Worldwide Holdings Inc (NYSE:HLT), around 14.37% of its 13F portfolio. Pelham Capital is also relatively very bullish on the stock, designating 7.93 percent of its 13F equity portfolio to HLT.
Due to the fact that Hilton Worldwide Holdings Inc (NYSE:HLT) has witnessed falling interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds that elected to cut their positions entirely in the second quarter. Interestingly, Daniel Sundheim’s D1 Capital Partners dropped the biggest position of the 750 funds followed by Insider Monkey, worth about $574.4 million in stock. Renaissance Technologies, also dumped its stock, about $93.2 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds in the second quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hilton Worldwide Holdings Inc (NYSE:HLT) but similarly valued. We will take a look at Zimmer Biomet Holdings Inc (NYSE:ZBH), Rockwell Automation Inc. (NYSE:ROK), Chewy, Inc. (NYSE:CHWY), Stanley Black & Decker, Inc. (NYSE:SWK), First Republic Bank (NYSE:FRC), Wayfair Inc (NYSE:W), and Cloudflare, Inc. (NYSE:NET). This group of stocks’ market values are closest to HLT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZBH | 48 | 1785063 | -2 |
| ROK | 25 | 535840 | -1 |
| CHWY | 43 | 634747 | 11 |
| SWK | 44 | 987529 | 11 |
| FRC | 34 | 1226197 | -7 |
| W | 35 | 3902769 | -2 |
| NET | 43 | 862578 | -2 |
| Average | 38.9 | 1419246 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.9 hedge funds with bullish positions and the average amount invested in these stocks was $1419 million. That figure was $4558 million in HLT’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Rockwell Automation Inc. (NYSE:ROK) is the least popular one with only 25 bullish hedge fund positions. Hilton Worldwide Holdings Inc (NYSE:HLT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HLT is 69. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on HLT as the stock returned 14.5% since the end of Q2 (through 10/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
