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Hedge Funds Are Dumping Tripadvisor Inc (TRIP)

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In this article we are going to use hedge fund sentiment as a tool and determine whether Tripadvisor Inc (NASDAQ:TRIP) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Tripadvisor Inc (NASDAQ:TRIP) shareholders have witnessed a decrease in enthusiasm from smart money of late. Tripadvisor Inc (NASDAQ:TRIP) was in 36 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that TRIP isn't among the 30 most popular stocks among hedge funds (click 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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's analyze the key hedge fund action surrounding Tripadvisor Inc (NASDAQ:TRIP).

Do Hedge Funds Think TRIP Is A Good Stock To Buy Now?

At the end of June, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in TRIP a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey's hedge fund database, PAR Capital Management, managed by Paul Reeder and Edward Shapiro, holds the biggest position in Tripadvisor Inc (NASDAQ:TRIP). PAR Capital Management has a $466.4 million position in the stock, comprising 11.4% of its 13F portfolio. On PAR Capital Management's heels is Whale Rock Capital Management, led by Alex Sacerdote, holding a $154.9 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Brian Ashford-Russell and Tim Woolley's Polar Capital, D. E. Shaw's D E Shaw and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position PAR Capital Management allocated the biggest weight to Tripadvisor Inc (NASDAQ:TRIP), around 11.42% of its 13F portfolio. Empirical Capital Partners is also relatively very bullish on the stock, dishing out 5.8 percent of its 13F equity portfolio to TRIP.

Seeing as Tripadvisor Inc (NASDAQ:TRIP) has experienced declining sentiment from the smart money, it's safe to say that there is a sect of money managers that elected to cut their full holdings by the end of the second quarter. It's worth mentioning that Renaissance Technologies dropped the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $67.9 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund dumped about $53.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds by the end of the second quarter.

Let's now review hedge fund activity in other stocks similar to Tripadvisor Inc (NASDAQ:TRIP). These stocks are Saia Inc (NASDAQ:SAIA), Olo Inc. (NYSE:OLO), Chindata Group Holdings Limited (NASDAQ:CD), Spirit Realty Capital Inc (NYSE:SRC), Vontier Corporation (NYSE:VNT), Helen of Troy Limited (NASDAQ:HELE), and Surgery Partners, Inc. (NASDAQ:SGRY). All of these stocks' market caps match TRIP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SAIA,22,418195,6 OLO,14,72548,-7 CD,10,115586,1 SRC,19,258783,1 VNT,34,927030,-4 HELE,17,182425,-12 SGRY,11,87325,1 Average,18.1,294556,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $1178 million in TRIP's case. Vontier Corporation (NYSE:VNT) is the most popular stock in this table. On the other hand Chindata Group Holdings Limited (NASDAQ:CD) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Tripadvisor Inc (NASDAQ:TRIP) is more popular among hedge funds. Our overall hedge fund sentiment score for TRIP is 70. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Unfortunately TRIP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on TRIP were disappointed as the stock returned -10.9% since the end of the second quarter (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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