At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
Is Expedia Group, Inc. (NASDAQ:EXPE) a first-rate investment now? Money managers are becoming less confident. The number of bullish hedge fund positions shrunk by 7 in recent months. Our calculations also showed that EXPE isn't among the 30 most popular stocks among hedge funds. EXPE was in 32 hedge funds' portfolios at the end of March. There were 39 hedge funds in our database with EXPE positions at the end of the previous quarter.
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 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 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.
Let's take a gander at the recent hedge fund action regarding Expedia Group, Inc. (NASDAQ:EXPE).
How have hedgies been trading Expedia Group, Inc. (NASDAQ:EXPE)?
At Q1's end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the fourth quarter of 2018. On the other hand, there were a total of 45 hedge funds with a bullish position in EXPE a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, PAR Capital Management held the most valuable stake in Expedia Group, Inc. (NASDAQ:EXPE), which was worth $947.7 million at the end of the first quarter. On the second spot was Altimeter Capital Management which amassed $341.4 million worth of shares. Moreover, Renaissance Technologies, GLG Partners, and D E Shaw were also bullish on Expedia Group, Inc. (NASDAQ:EXPE), allocating a large percentage of their portfolios to this stock.
Since Expedia Group, Inc. (NASDAQ:EXPE) has witnessed declining sentiment from the smart money, logic holds that there were a few money managers who sold off their full holdings by the end of the third quarter. At the top of the heap, Robert Rodriguez and Steven Romick's First Pacific Advisors LLC cut the largest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $165 million in stock, and Dennis Puri and Oliver Keller's Hunt Lane Capital was right behind this move, as the fund said goodbye to about $22.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 7 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Expedia Group, Inc. (NASDAQ:EXPE) but similarly valued. These stocks are iQIYI, Inc. (NASDAQ:IQ), Ameriprise Financial, Inc. (NYSE:AMP), DXC Technology Company (NYSE:DXC), and Synopsys, Inc. (NASDAQ:SNPS). This group of stocks' market valuations resemble EXPE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IQ,22,1039742,-3 AMP,34,861846,2 DXC,46,2102765,3 SNPS,31,1562669,-3 Average,33.25,1391756,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $1392 million. That figure was $2091 million in EXPE's case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand iQIYI, Inc. (NASDAQ:IQ) is the least popular one with only 22 bullish hedge fund positions. Expedia Group, Inc. (NASDAQ:EXPE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately EXPE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EXPE investors were disappointed as the stock returned -2.2% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.