Is RLJ A Good Stock To Buy Now?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards RLJ Lodging Trust (NYSE:RLJ).

Is RLJ a good stock to buy now? RLJ Lodging Trust (NYSE:RLJ) investors should pay attention to a decrease in hedge fund sentiment lately. RLJ Lodging Trust (NYSE:RLJ) was in 15 hedge funds’ portfolios at the end of September. The all time high for this statistic is 25. Our calculations also showed that RLJ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are viewed as unimportant, outdated investment vehicles of years past. While there are more than 8000 funds in operation at present, Our experts choose to focus on the masters of this group, about 850 funds. Most estimates calculate that this group of people oversee bulk of the hedge fund industry’s total capital, and by paying attention to their finest stock picks, Insider Monkey has identified various investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a gander at the latest hedge fund action surrounding RLJ Lodging Trust (NYSE:RLJ).

Do Hedge Funds Think RLJ Is A Good Stock To Buy Now?

At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RLJ over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in RLJ Lodging Trust (NYSE:RLJ) was held by Fisher Asset Management, which reported holding $20.7 million worth of stock at the end of September. It was followed by Forward Management with a $12.8 million position. Other investors bullish on the company included Newtyn Management, Balyasny Asset Management, and LDR Capital. In terms of the portfolio weights assigned to each position LDR Capital allocated the biggest weight to RLJ Lodging Trust (NYSE:RLJ), around 6.69% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, setting aside 2.75 percent of its 13F equity portfolio to RLJ.

Judging by the fact that RLJ Lodging Trust (NYSE:RLJ) has faced a decline in interest from the smart money, it’s safe to say that there was a specific group of hedge funds that decided to sell off their full holdings in the third quarter. At the top of the heap, Paul Tudor Jones’s Tudor Investment Corp dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $1.3 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund sold off about $0.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to RLJ Lodging Trust (NYSE:RLJ). These stocks are Azure Power Global Limited (NYSE:AZRE), Industrial Logistics Properties Trust (NASDAQ:ILPT), The Michaels Companies Inc (NASDAQ:MIK), Southwestern Energy Company (NYSE:SWN), Global Net Lease, Inc. (NYSE:GNL), Perficient, Inc. (NASDAQ:PRFT), and Century Communities, Inc (NYSE:CCS). All of these stocks’ market caps are similar to RLJ’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $80 million in RLJ’s case. The Michaels Companies Inc (NASDAQ:MIK) is the most popular stock in this table. On the other hand Azure Power Global Limited (NYSE:AZRE) is the least popular one with only 4 bullish hedge fund positions. RLJ Lodging Trust (NYSE:RLJ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RLJ is 36.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on RLJ as the stock returned 54.3% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.