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 Wyndham Destinations, Inc. (NYSE:WYND).
Is Wyndham Destinations, Inc. (NYSE:WYND) a worthy investment right now? The smart money is turning less bullish. The number of bullish hedge fund bets dropped by 1 in recent months. Our calculations also showed that WYND isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Harold Levy of Iridian Asset Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action encompassing Wyndham Destinations, Inc. (NYSE:WYND).
What have hedge funds been doing with Wyndham Destinations, Inc. (NYSE:WYND)?
Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in WYND a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Iridian Asset Management, managed by David Cohen and Harold Levy, holds the largest position in Wyndham Destinations, Inc. (NYSE:WYND). Iridian Asset Management has a $304.4 million position in the stock, comprising 4.8% of its 13F portfolio. Coming in second is Tremblant Capital, managed by Brett Barakett, which holds a $73.8 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Stuart J. Zimmer’s Zimmer Partners and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Iridian Asset Management allocated the biggest weight to Wyndham Destinations, Inc. (NYSE:WYND), around 4.77% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, earmarking 4.24 percent of its 13F equity portfolio to WYND.
Due to the fact that Wyndham Destinations, Inc. (NYSE:WYND) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds that slashed their full holdings by the end of the third quarter. Intriguingly, Frederick DiSanto’s Ancora Advisors dropped the largest position of the 750 funds tracked by Insider Monkey, comprising an estimated $6.1 million in stock, and David Harding’s Winton Capital Management was right behind this move, as the fund dumped about $3.5 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Wyndham Destinations, Inc. (NYSE:WYND). These stocks are Perspecta Inc. (NYSE:PRSP), Service Properties Trust (NASDAQ:SVC), Tempur Sealy International Inc. (NYSE:TPX), and MSA Safety Incorporated (NYSE:MSA). This group of stocks’ market values resemble WYND’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRSP | 40 | 719169 | 0 |
| SVC | 13 | 48463 | 0 |
| TPX | 29 | 1355351 | -4 |
| MSA | 9 | 51906 | -5 |
| Average | 22.75 | 543722 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $544 million. That figure was $522 million in WYND’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 9 bullish hedge fund positions. Wyndham Destinations, Inc. (NYSE:WYND) 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 WYND wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); WYND investors were disappointed as the stock returned 5.4% 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.
