Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Chesapeake Lodging Trust (NYSE:CHSP) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare CHSP to other stocks including Rambus Inc. (NASDAQ:RMBS), Actuant Corporation (NYSE:ATU), and TeleTech Holdings, Inc. (NASDAQ:TTEC) to get a better sense of its popularity.
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 have hedgies been trading Chesapeake Lodging Trust (NYSE:CHSP)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHSP over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in Chesapeake Lodging Trust (NYSE:CHSP). Renaissance Technologies has a $8.9 million position in the stock. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management which holds a $2.1 million position. Some other peers that are bullish include David Costen Haley’s HBK Investments, George Hall’s Clinton Group and John Overdeck and David Siegel’s Two Sigma Advisors. 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-microcap stocks.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Stevens Capital Management).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Chesapeake Lodging Trust (NYSE:CHSP) but similarly valued. These stocks are Rambus Inc. (NASDAQ:RMBS), Actuant Corporation (NYSE:ATU), TeleTech Holdings, Inc. (NASDAQ:TTEC), and Fidelity & Guaranty Life (NYSE:FGL). This group of stocks’ market valuations are closest to CHSP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RMBS | 14 | 46738 | 5 |
| ATU | 16 | 248461 | 7 |
| TTEC | 8 | 18368 | -1 |
| FGL | 12 | 107192 | 0 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $16 million in CHSP’s case. Actuant Corporation (NYSE:ATU) is the most popular stock in this table. On the other hand TeleTech Holdings, Inc. (NASDAQ:TTEC) is the least popular one with only 8 bullish hedge fund positions. Chesapeake Lodging Trust (NYSE:CHSP) 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. In this regard ATU might be a better candidate to consider taking a long position in.
Disclosure: None
