Were Hedge Funds Right About Expedia Group Inc (EXPE)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Expedia Group Inc (NASDAQ:EXPE) in this article.

Is Expedia Group Inc (NASDAQ:EXPE) a buy here? Hedge funds were taking a bullish view. The number of bullish hedge fund positions moved up by 20 lately. Expedia Group Inc (NASDAQ:EXPE) was in 61 hedge funds’ portfolios at the end of June. The all time high for this statistics is 73. Our calculations also showed that EXPE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 41 hedge funds in our database with EXPE positions at the end of the first quarter.

Video: 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Brad Gerstner of Altimeter Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to analyze the fresh hedge fund action encompassing Expedia Group Inc (NASDAQ:EXPE).

How are hedge funds trading Expedia Group Inc (NASDAQ:EXPE)?

At second quarter’s end, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 49% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards EXPE over the last 20 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Expedia Group Inc (NASDAQ:EXPE) was held by Melvin Capital Management, which reported holding $635.2 million worth of stock at the end of September. It was followed by D1 Capital Partners with a $486.6 million position. Other investors bullish on the company included Altimeter Capital Management, Citadel Investment Group, and Melvin Capital Management. In terms of the portfolio weights assigned to each position Altimeter Capital Management allocated the biggest weight to Expedia Group Inc (NASDAQ:EXPE), around 9.25% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, dishing out 7.65 percent of its 13F equity portfolio to EXPE.

Now, key hedge funds were leading the bulls’ herd. D1 Capital Partners, managed by Daniel Sundheim, established the most valuable position in Expedia Group Inc (NASDAQ:EXPE). D1 Capital Partners had $486.6 million invested in the company at the end of the quarter. Karthik Sarma’s SRS Investment Management also initiated a $88.5 million position during the quarter. The following funds were also among the new EXPE investors: Alexander Mitchell’s Scopus Asset Management, Jeffrey Tannenbaum’s Fir Tree, and Stephen Mildenhall’s Contrarius Investment Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Expedia Group Inc (NASDAQ:EXPE) but similarly valued. We will take a look at Brown & Brown, Inc. (NYSE:BRO), Open Text Corporation (NASDAQ:OTEX), Ceridian HCM Holding Inc. (NYSE:CDAY), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Ulta Beauty, Inc. (NASDAQ:ULTA), Kirkland Lake Gold Ltd. (NYSE:KL), and Enel Americas S.A. (NYSE:ENIA). All of these stocks’ market caps resemble EXPE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $631 million. That figure was $3109 million in EXPE’s case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Expedia Group Inc (NASDAQ:EXPE) is more popular among hedge funds. Our overall hedge fund sentiment score for EXPE is 85.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and still beat the market by 19.7 percentage points. Unfortunately EXPE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on EXPE were disappointed as the stock returned 10.4% since the end of the second quarter (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.