We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Service Properties Trust (NASDAQ:SVC).
Service Properties Trust (NASDAQ:SVC) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of September. At the end of this article we will also compare SVC to other stocks including Tempur Sealy International Inc. (NYSE:TPX), Mine Safety Appliances (NYSE:MSA), and VEON Ltd. (NASDAQ:VEON) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are tons of tools shareholders employ to value stocks. Two of the less utilized tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top investment managers can outperform the broader indices by a very impressive margin (see the details here).
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the key hedge fund action encompassing Service Properties Trust (NASDAQ:SVC).
Hedge fund activity in Service Properties Trust (NASDAQ:SVC)
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SVC over the last 17 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Service Properties Trust (NASDAQ:SVC), with a stake worth $18.7 million reported as of the end of September. Trailing Renaissance Technologies was Pzena Investment Management, which amassed a stake valued at $15.4 million. Millennium Management, Two Sigma Advisors, and Paloma Partners 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 Neo Ivy Capital allocated the biggest weight to Service Properties Trust (NASDAQ:SVC), around 0.15% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to SVC.
Seeing as Service Properties Trust (NASDAQ:SVC) has experienced a decline in interest from the smart money, logic holds that there was a specific group of hedgies that slashed their positions entirely last quarter. Intriguingly, Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest investment of all the hedgies watched by Insider Monkey, comprising about $1.3 million in stock, and Louis Navellier’s Navellier & Associates was right behind this move, as the fund said goodbye to about $0.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Service Properties Trust (NASDAQ:SVC) but similarly valued. These stocks are Tempur Sealy International Inc. (NYSE:TPX), Mine Safety Appliances (NYSE:MSA), VEON Ltd. (NASDAQ:VEON), and Janus Henderson Group plc (NYSE:JHG). This group of stocks’ market caps resemble SVC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPX | 29 | 1355351 | -4 |
| MSA | 9 | 51906 | -5 |
| VEON | 11 | 44206 | -1 |
| JHG | 14 | 183137 | -1 |
| Average | 15.75 | 408650 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $409 million. That figure was $48 million in SVC’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand Mine Safety Appliances (NYSE:MSA) is the least popular one with only 9 bullish hedge fund positions. Service Properties Trust (NASDAQ:SVC) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SVC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SVC investors were disappointed as the stock returned -7.8% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.