Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether Huazhu Group Limited (NASDAQ:HTHT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Huazhu Group Limited (NASDAQ:HTHT) a buy, sell, or hold? Investors who are in the know are in an optimistic mood. The number of long hedge fund positions moved up by 2 recently. Our calculations also showed that HTHT 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).
To the average investor there are several formulas shareholders have at their disposal to evaluate stocks. A duo of the most underrated formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top money managers can outperform their index-focused peers by a significant margin (see the details here).
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the latest hedge fund action encompassing Huazhu Group Limited (NASDAQ:HTHT).
What have hedge funds been doing with Huazhu Group Limited (NASDAQ:HTHT)?
At Q4’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in HTHT a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jonathan Guo’s Yiheng Capital has the largest position in Huazhu Group Limited (NASDAQ:HTHT), worth close to $113.6 million, accounting for 10% of its total 13F portfolio. The second most bullish fund manager is Generation Investment Management, managed by David Blood and Al Gore, which holds a $49.4 million position; 0.3% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Josh Resnick’s Jericho Capital Asset Management, Cliff Asness’s AQR Capital Management and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position Yiheng Capital allocated the biggest weight to Huazhu Group Limited (NASDAQ:HTHT), around 9.97% of its 13F portfolio. Old Well Partners is also relatively very bullish on the stock, earmarking 6.64 percent of its 13F equity portfolio to HTHT.
As aggregate interest increased, key hedge funds have jumped into Huazhu Group Limited (NASDAQ:HTHT) headfirst. Jericho Capital Asset Management, managed by Josh Resnick, created the largest position in Huazhu Group Limited (NASDAQ:HTHT). Jericho Capital Asset Management had $33 million invested in the company at the end of the quarter. Campbell Wilson’s Old Well Partners also made a $8.2 million investment in the stock during the quarter. The following funds were also among the new HTHT investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Benjamin A. Smith’s Laurion Capital Management, and Steve Cohen’s Point72 Asset Management.
Let’s now review hedge fund activity in other stocks similar to Huazhu Group Limited (NASDAQ:HTHT). We will take a look at VICI Properties Inc. (NYSE:VICI), LINE Corporation (NYSE:LN), The Trade Desk, Inc. (NASDAQ:TTD), and Lincoln National Corporation (NYSE:LNC). This group of stocks’ market values match HTHT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VICI | 37 | 1826674 | -3 |
| LN | 13 | 96390 | 5 |
| TTD | 24 | 368569 | -2 |
| LNC | 40 | 1212971 | 3 |
| Average | 28.5 | 876151 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $876 million. That figure was $259 million in HTHT’s case. Lincoln National Corporation (NYSE:LNC) is the most popular stock in this table. On the other hand LINE Corporation (NYSE:LN) is the least popular one with only 13 bullish hedge fund positions. Huazhu Group Limited (NASDAQ:HTHT) 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 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately HTHT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HTHT investors were disappointed as the stock returned -30.9% 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.
