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2019 Review: Top Hedge Fund Stocks vs. Hilton Grand Vacations Inc. (HGV)

Reymerlyn Martin

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 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 Hilton Grand Vacations Inc. (NYSE:HGV).

Is Hilton Grand Vacations Inc. (NYSE:HGV) the right investment to pursue these days? The smart money is in an optimistic mood. The number of bullish hedge fund positions rose by 5 recently. Our calculations also showed that HGV isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_30570" align="aligncenter" width="600"] James Dinan of York Capital Management[/caption]

YORK CAPITAL MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's view the latest hedge fund action surrounding Hilton Grand Vacations Inc. (NYSE:HGV).

How have hedgies been trading Hilton Grand Vacations Inc. (NYSE:HGV)?

At Q3's end, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in HGV over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Long Pond Capital was the largest shareholder of Hilton Grand Vacations Inc. (NYSE:HGV), with a stake worth $251.7 million reported as of the end of September. Trailing Long Pond Capital was Zimmer Partners, which amassed a stake valued at $193.6 million. P2 Capital Partners, Centerbridge Partners, and Empyrean Capital 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 Centerbridge Partners allocated the biggest weight to Hilton Grand Vacations Inc. (NYSE:HGV), around 23.84% of its 13F portfolio. P2 Capital Partners is also relatively very bullish on the stock, setting aside 9.73 percent of its 13F equity portfolio to HGV.

Consequently, some big names have been driving this bullishness. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, assembled the most outsized position in Hilton Grand Vacations Inc. (NYSE:HGV). Empyrean Capital Partners had $67.8 million invested in the company at the end of the quarter. Benjamin Pass's TOMS Capital also made a $14.4 million investment in the stock during the quarter. The other funds with brand new HGV positions are Robert Emil Zoellner's Alpine Associates, James Dinan's York Capital Management, and Himanshu Gulati's Antara Capital.

Let's check out hedge fund activity in other stocks similar to Hilton Grand Vacations Inc. (NYSE:HGV). These stocks are Proto Labs Inc (NYSE:PRLB), El Paso Electric Company (NYSE:EE), Murphy USA Inc. (NYSE:MUSA), and AMC Networks Inc (NASDAQ:AMCX). All of these stocks' market caps are similar to HGV's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRLB,8,14581,-1 EE,13,387516,-3 MUSA,19,224363,0 AMCX,22,275908,3 Average,15.5,225592,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $1079 million in HGV's case. AMC Networks Inc (NASDAQ:AMCX) is the most popular stock in this table. On the other hand Proto Labs Inc (NYSE:PRLB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Hilton Grand Vacations Inc. (NYSE:HGV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately HGV wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HGV were disappointed as the stock returned 30.7% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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