“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Xenia Hotels & Resorts Inc (NYSE:XHR) and see how it was affected.
Xenia Hotels & Resorts Inc (NYSE:XHR) shareholders have witnessed an increase in hedge fund interest lately. XHR was in 12 hedge funds’ portfolios at the end of the second quarter of 2019. There were 9 hedge funds in our database with XHR positions at the end of the previous quarter. Our calculations also showed that XHR isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the recent hedge fund action surrounding Xenia Hotels & Resorts Inc (NYSE:XHR).
What have hedge funds been doing with Xenia Hotels & Resorts Inc (NYSE:XHR)?
At Q2’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards XHR over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Xenia Hotels & Resorts Inc (NYSE:XHR), with a stake worth $9.7 million reported as of the end of March. Trailing Millennium Management was Renaissance Technologies, which amassed a stake valued at $9.3 million. AQR Capital Management, Two Sigma Advisors, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have jumped into Xenia Hotels & Resorts Inc (NYSE:XHR) headfirst. Citadel Investment Group, managed by Ken Griffin, created the biggest position in Xenia Hotels & Resorts Inc (NYSE:XHR). Citadel Investment Group had $1.7 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new XHR investors: Benjamin A. Smith’s Laurion Capital Management, Michael Gelband’s ExodusPoint Capital, and Thomas Bailard’s Bailard Inc.
Let’s now review hedge fund activity in other stocks similar to Xenia Hotels & Resorts Inc (NYSE:XHR). We will take a look at Emergent Biosolutions Inc (NYSE:EBS), Baozun Inc (NASDAQ:BZUN), EVO Payments, Inc. (NASDAQ:EVOP), and Vishay Intertechnology, Inc. (NYSE:VSH). This group of stocks’ market values match XHR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EBS | 13 | 139145 | 2 |
| BZUN | 13 | 91161 | -1 |
| EVOP | 13 | 73800 | 0 |
| VSH | 19 | 297689 | -2 |
| Average | 14.5 | 150449 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $38 million in XHR’s case. Vishay Intertechnology, Inc. (NYSE:VSH) is the most popular stock in this table. On the other hand Emergent Biosolutions Inc (NYSE:EBS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Xenia Hotels & Resorts Inc (NYSE:XHR) is even less popular than EBS. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on XHR, though not to the same extent, as the stock returned 2.6% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
