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Hedge Funds Have Never Been This Bullish On Huazhu Group Limited (HTHT)

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At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Huazhu Group Limited (NASDAQ:HTHT) makes for a good investment right now.

Huazhu Group Limited (NASDAQ:HTHT) was in 27 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 23. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. HTHT has seen an increase in activity from the world's largest hedge funds of late. There were 23 hedge funds in our database with HTHT holdings at the end of December. Our calculations also showed that HTHT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery 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 take a look at the fresh hedge fund action encompassing Huazhu Group Limited (NASDAQ:HTHT).

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

At the end of March, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTHT over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HTHT A Good Stock To Buy?
Is HTHT A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Jonathan Guo's Yiheng Capital has the biggest position in Huazhu Group Limited (NASDAQ:HTHT), worth close to $168.6 million, comprising 7.6% of its total 13F portfolio. On Yiheng Capital's heels is Kerr Neilson of Platinum Asset Management, with a $129.8 million position; 2.9% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise Hyder Ahmad's Broad Peak Investment Holdings, Richard Driehaus's Driehaus Capital and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners. In terms of the portfolio weights assigned to each position One01 Capital allocated the biggest weight to Huazhu Group Limited (NASDAQ:HTHT), around 7.94% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, dishing out 7.65 percent of its 13F equity portfolio to HTHT.

As one would reasonably expect, key hedge funds were breaking ground themselves. Aubrey Capital Management, managed by Andrew Dalrymple and Barry McCorkell, assembled the biggest position in Huazhu Group Limited (NASDAQ:HTHT). Aubrey Capital Management had $11.8 million invested in the company at the end of the quarter. Michael R. Weisberg's Crestwood Capital Management also initiated a $11 million position during the quarter. The other funds with brand new HTHT positions are Steve Cohen's Point72 Asset Management, Josh Resnick's Jericho Capital Asset Management, and Simon Sadler's Segantii Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Huazhu Group Limited (NASDAQ:HTHT) but similarly valued. We will take a look at J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), Imperial Oil Limited (NYSE:IMO), Broadridge Financial Solutions, Inc. (NYSE:BR), Seagate Technology plc (NASDAQ:STX), CMS Energy Corporation (NYSE:CMS), Waters Corporation (NYSE:WAT), and Essex Property Trust Inc (NYSE:ESS). This group of stocks' market valuations match HTHT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JBHT,22,339245,-4 IMO,13,65541,5 BR,22,233035,-3 STX,27,1970595,-3 CMS,28,955427,4 WAT,34,2331723,4 ESS,30,196855,5 Average,25.1,870346,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $870 million. That figure was $688 million in HTHT's case. Waters Corporation (NYSE:WAT) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 13 bullish hedge fund positions. Huazhu Group Limited (NASDAQ:HTHT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HTHT is 72.3. 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. 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 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately HTHT wasn't nearly as popular as these 5 stocks and hedge funds that were betting on HTHT were disappointed as the stock returned -9.9% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.

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