A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Playa Hotels & Resorts N.V. (NASDAQ:PLYA).
Is Playa Hotels & Resorts N.V. (NASDAQ:PLYA) a buy here? The smart money is taking a bearish view. The number of long hedge fund positions were trimmed by 1 recently. Our calculations also showed that PLYA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PLYA was in 17 hedge funds' portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with PLYA positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_338420" align="aligncenter" width="500"] Parag Vora of HG Vora Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. Let's go over the new hedge fund action regarding Playa Hotels & Resorts N.V. (NASDAQ:PLYA).
How are hedge funds trading Playa Hotels & Resorts N.V. (NASDAQ:PLYA)?
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the second quarter of 2019. On the other hand, there were a total of 15 hedge funds with a bullish position in PLYA 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.
When looking at the institutional investors followed by Insider Monkey, Farallon Capital holds the number one position in Playa Hotels & Resorts N.V. (NASDAQ:PLYA). Farallon Capital has a $239.7 million position in the stock, comprising 2.5% of its 13F portfolio. Sitting at the No. 2 spot is HG Vora Capital Management, managed by Parag Vora, which holds a $53.6 million position; the fund has 5.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Michael A. Price and Amos Meron's Empyrean Capital Partners, David Steinberg and Eric Udoff's Marlowe Partners and John Khoury's Long Pond Capital. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Playa Hotels & Resorts N.V. (NASDAQ:PLYA), around 15.59% of its 13F portfolio. TPG-AXON Management LP is also relatively very bullish on the stock, setting aside 13.72 percent of its 13F equity portfolio to PLYA.
Seeing as Playa Hotels & Resorts N.V. (NASDAQ:PLYA) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few funds that elected to cut their positions entirely heading into Q4. It's worth mentioning that Tim Hurd and Ed Magnus's BlueSpruce Investments sold off the biggest position of the "upper crust" of funds tracked by Insider Monkey, worth an estimated $18.5 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also dropped its stock, about $0.2 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds heading into Q4.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Playa Hotels & Resorts N.V. (NASDAQ:PLYA) but similarly valued. We will take a look at Xperi Corporation (NASDAQ:XPER), Fate Therapeutics Inc (NASDAQ:FATE), Accelerate Diagnostics Inc (NASDAQ:AXDX), and MRC Global Inc (NYSE:MRC). All of these stocks' market caps are similar to PLYA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XPER,19,114631,-2 FATE,23,417119,5 AXDX,6,50627,-4 MRC,12,73329,-3 Average,15,163927,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $436 million in PLYA's case. Fate Therapeutics Inc (NASDAQ:FATE) is the most popular stock in this table. On the other hand Accelerate Diagnostics Inc (NASDAQ:AXDX) is the least popular one with only 6 bullish hedge fund positions. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 PLYA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PLYA were disappointed as the stock returned 0.6% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.