Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins 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.
Booking Holdings Inc. (NASDAQ:BKNG) has experienced a decrease in hedge fund interest of late. BKNG was in 72 hedge funds' portfolios at the end of the second quarter of 2019. There were 77 hedge funds in our database with BKNG holdings at the end of the previous quarter. Our calculations also showed that BKNG ranked 27th among the 30 most popular stocks among hedge funds.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. Let's take a gander at the new hedge fund action regarding Booking Holdings Inc. (NASDAQ:BKNG).
How have hedgies been trading Booking Holdings Inc. (NASDAQ:BKNG)?
Heading into the third quarter of 2019, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BKNG over the last 16 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Booking Holdings Inc. (NASDAQ:BKNG) was held by Citadel Investment Group, which reported holding $684.6 million worth of stock at the end of March. It was followed by Lone Pine Capital with a $602.5 million position. Other investors bullish on the company included Yacktman Asset Management, D E Shaw, and AQR Capital Management.
Due to the fact that Booking Holdings Inc. (NASDAQ:BKNG) has faced a decline in interest from the smart money, it's easy to see that there were a few fund managers who were dropping their entire stakes last quarter. Interestingly, Chase Coleman's Tiger Global Management LLC cut the largest position of all the hedgies tracked by Insider Monkey, valued at about $494.7 million in stock. Andrew Immerman and Jeremy Schiffman's fund, Palestra Capital Management, also dropped its stock, about $113.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Booking Holdings Inc. (NASDAQ:BKNG). These stocks are China Petroleum & Chemical Corp (NYSE:SNP), Lowe's Companies, Inc. (NYSE:LOW), Mondelez International Inc (NASDAQ:MDLZ), and Banco Bradesco SA (NYSE:BBD). This group of stocks' market valuations are similar to BKNG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNP,11,222276,-2 LOW,63,4104051,7 MDLZ,47,2755070,0 BBD,14,751983,-4 Average,33.75,1958345,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $1958 million. That figure was $5254 million in BKNG's case. Lowe's Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Booking Holdings Inc. (NASDAQ:BKNG) is more popular among hedge funds. 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 BKNG as the stock returned 4.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.