It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in RLJ Lodging Trust (NYSE:RLJ).
RLJ Lodging Trust (NYSE:RLJ) investors should be aware of an increase in hedge fund interest in recent months. RLJ was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. There were 7 hedge funds in our database with RLJ positions at the end of the second 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 Universal Display Corporation (NASDAQ:OLED), PNM Resources, Inc. (NYSE:PNM), and WESCO International, Inc. (NYSE:WCC) to gather more data points.
Follow Rlj Lodging Trust (NYSE:RLJ)
Follow Rlj Lodging Trust (NYSE:RLJ)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How are hedge funds trading RLJ Lodging Trust (NYSE:RLJ)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a 29% increase from the second quarter of 2016. On the other hand, there were a total of 18 hedge funds with a bullish position in RLJ at the beginning of this year, so hedge fund positions are still down by 50% this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Fisher Asset Management, led by Ken Fisher, holds the most valuable position in RLJ Lodging Trust (NYSE:RLJ). Fisher Asset Management has a $55 million position in the stock. Coming in second is AEW Capital Management, led by Jeffrey Furber, which holds a $35.3 million position. Other members of the smart money that hold long positions contain Cliff Asness’ AQR Capital Management, Millennium Management, one of the largest hedge funds in the world, and Paul Marshall and Ian Wace’s Marshall Wace LLP. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
As aggregate interest increased, some big names have jumped into RLJ Lodging Trust (NYSE:RLJ) headfirst. Millennium Management, founded by Israel Englander, established the most valuable position in RLJ Lodging Trust (NYSE:RLJ). Millennium Management had $4 million invested in the company at the end of the quarter. Marshall Wace LLP also initiated a $3.4 million position during the quarter. The other funds with brand new RLJ positions are Matthew Tewksbury’s Stevens Capital Management and James Dondero’s Highland Capital Management.
Let’s check out hedge fund activity in other stocks similar to RLJ Lodging Trust (NYSE:RLJ). We will take a look at Universal Display Corporation (NASDAQ:OLED), PNM Resources, Inc. (NYSE:PNM), WESCO International, Inc. (NYSE:WCC), and Nice Systems Ltd (ADR) (NASDAQ:NICE). This group of stocks’ market values are similar to RLJ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OLED | 20 | 122003 | 0 |
| PNM | 13 | 161561 | 3 |
| WCC | 22 | 119988 | 0 |
| NICE | 14 | 169988 | 1 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $105 million in RLJ’s case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand PNM Resources, Inc. (NYSE:PNM) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks RLJ Lodging Trust (NYSE:RLJ) is even less popular than PNM. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.
Disclosure: None
