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How do we determine whether Sunstone Hotel Investors Inc (NYSE:SHO) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Sunstone Hotel Investors Inc (NYSE:SHO) a buy right now? Prominent investors are in an optimistic mood. The number of bullish hedge fund bets improved by 4 recently. Our calculations also showed that SHO isn't among the 30 most popular stocks among hedge funds.
In the eyes of most market participants, hedge funds are seen as underperforming, old financial vehicles of the past. While there are more than 8000 funds in operation today, Our experts choose to focus on the top tier of this group, approximately 750 funds. Most estimates calculate that this group of people have their hands on the majority of the hedge fund industry's total capital, and by keeping an eye on their finest equity investments, Insider Monkey has formulated a number of investment strategies that have historically outstripped the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let's take a look at the new hedge fund action encompassing Sunstone Hotel Investors Inc (NYSE:SHO).
What does the smart money think about Sunstone Hotel Investors Inc (NYSE:SHO)?
At Q1's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SHO over the last 15 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Sunstone Hotel Investors Inc (NYSE:SHO), which was worth $43.8 million at the end of the first quarter. On the second spot was Echo Street Capital Management which amassed $36.1 million worth of shares. Moreover, Elliott Management, Citadel Investment Group, and Millennium Management were also bullish on Sunstone Hotel Investors Inc (NYSE:SHO), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, specific money managers were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, created the most outsized position in Sunstone Hotel Investors Inc (NYSE:SHO). Tudor Investment Corp had $1.4 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Thomas Bailard's Bailard Inc, Steve Cohen's Point72 Asset Management, and David Harding's Winton Capital Management.
Let's go over hedge fund activity in other stocks similar to Sunstone Hotel Investors Inc (NYSE:SHO). These stocks are Tetra Tech, Inc. (NASDAQ:TTEK), MFA Financial, Inc. (NYSE:MFA), Silgan Holdings Inc. (NASDAQ:SLGN), and iRobot Corporation (NASDAQ:IRBT). All of these stocks' market caps match SHO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TTEK,23,58316,-2 MFA,16,130476,-2 SLGN,15,156867,1 IRBT,15,121719,1 Average,17.25,116845,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $156 million in SHO's case. Tetra Tech, Inc. (NASDAQ:TTEK) is the most popular stock in this table. On the other hand Silgan Holdings Inc. (NASDAQ:SLGN) is the least popular one with only 15 bullish hedge fund positions. Sunstone Hotel Investors Inc (NYSE:SHO) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 SHO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SHO were disappointed as the stock returned -6.5% during the same 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.
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