How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding La Quinta Holdings Inc (NYSE:LQ).
La Quinta Holdings Inc (NYSE:LQ) investors should be aware of a decrease in hedge fund interest lately. LQ was in 24 hedge funds’ portfolios at the end of September. There were 29 hedge funds in our database with LQ holdings at the end of the previous quarter. 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 BGC Partners, Inc. (NASDAQ:BGCP), Gold Fields Limited (ADR) (NYSE:GFI), and Littelfuse, Inc. (NASDAQ:LFUS) to gather more data points.
Follow La Quinta Holdings Inc. (NYSE:LQ)
Follow La Quinta Holdings Inc. (NYSE:LQ)
In the 21st century investor’s toolkit there are tons of metrics stock traders employ to appraise their stock investments. Two of the most useful metrics are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce their index-focused peers by a very impressive margin (see the details here).
With all of this in mind, let’s go over the recent action surrounding La Quinta Holdings Inc (NYSE:LQ).
What have hedge funds been doing with La Quinta Holdings Inc (NYSE:LQ)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 17% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in La Quinta Holdings Inc (NYSE:LQ). The fund has a $68.4 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Parag Vora of HG Vora Capital Management, with a $39.5 million stake; the fund has 4.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Malcolm Fairbairn’s Ascend Capital, Greg Poole’s Echo Street Capital Management and Joel Greenblatt’s Gotham Asset Management.
Judging by the fact that La Quinta Holdings Inc (NYSE:LQ) has faced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of funds who sold off their entire stakes in the third quarter. Intriguingly, Ken Heebner’s Capital Growth Management dumped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $58.7 million. Tom Sandell’s fund, Sandell Asset Management, also cut its investment, about $13.4 million worth of LQ shares. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to La Quinta Holdings Inc (NYSE:LQ). We will take a look at BGC Partners, Inc. (NASDAQ:BGCP), Gold Fields Limited (ADR) (NYSE:GFI), Littelfuse, Inc. (NASDAQ:LFUS), and Cheetah Mobile Inc (ADR) (NYSE:CMCM). This group of stocks’ market valuations match LQ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BGCP | 18 | 128405 | 2 |
| GFI | 16 | 165266 | 0 |
| LFUS | 13 | 136706 | -7 |
| CMCM | 5 | 21203 | -5 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand Cheetah Mobile Inc (ADR) (NYSE:CMCM) is the least popular one with only 5 bullish hedge fund positions. La Quinta Holdings Inc (NYSE:LQ) clearly outshines all the stocks from this group, having also attracted more of the hedgies’ money, as overall investment stood at $319 million at the end of the quarter. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
