Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find write-ups about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Choice Hotels International, Inc. (NYSE:CHH) based on that data.
Choice Hotels International, Inc. (NYSE:CHH) investors should be aware of an increase in hedge fund sentiment in recent months. Our calculations also showed that CHH isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 look at the new hedge fund action regarding Choice Hotels International, Inc. (NYSE:CHH).
How have hedgies been trading Choice Hotels International, Inc. (NYSE:CHH)?
At Q2's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CHH over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Greg Poole's Echo Street Capital Management has the most valuable position in Choice Hotels International, Inc. (NYSE:CHH), worth close to $112.6 million, comprising 2% of its total 13F portfolio. On Echo Street Capital Management's heels is GLG Partners, managed by Noam Gottesman, which holds a $27.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Tom Gayner's Markel Gayner Asset Management, John Brennan's Sirios Capital Management and Ken Griffin's Citadel Investment Group.
As aggregate interest increased, key hedge funds were breaking ground themselves. Highland Capital Management, managed by James Dondero, established the most outsized position in Choice Hotels International, Inc. (NYSE:CHH). Highland Capital Management had $3.5 million invested in the company at the end of the quarter. Curtis Schenker and Craig Effron's Scoggin also made a $2.1 million investment in the stock during the quarter. The only other fund with a brand new CHH position is Claes Fornell's CSat Investment Advisory.
Let's now take a look at hedge fund activity in other stocks similar to Choice Hotels International, Inc. (NYSE:CHH). We will take a look at Radian Group Inc (NYSE:RDN), Grupo Aeroportuario del Sureste (NYSE:ASR), Portland General Electric Company (NYSE:POR), and Shell Midstream Partners LP (NYSE:SHLX). This group of stocks' market values are closest to CHH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RDN,22,217365,3 ASR,7,44592,-1 POR,18,280297,-1 SHLX,5,11536,-2 Average,13,138448,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $193 million in CHH's case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 5 bullish hedge fund positions. Choice Hotels International, Inc. (NYSE:CHH) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on CHH, though not to the same extent, as the stock returned 2.5% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.