The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Chesapeake Lodging Trust (NYSE:CHSP), and what that likely means for the prospects of the company and its stock.
Hedge fund interest in Chesapeake Lodging Trust (NYSE:CHSP) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CHSP to other stocks including Instructure, Inc. (NYSE:INST), Kaiser Aluminum Corp. (NASDAQ:KALU), and The Simply Good Foods Company (NASDAQ:SMPL) to get a better sense of its popularity.
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.
We're going to go over the recent hedge fund action surrounding Chesapeake Lodging Trust (NYSE:CHSP).
Hedge fund activity in Chesapeake Lodging Trust (NYSE:CHSP)
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHSP over the last 15 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Balyasny Asset Management held the most valuable stake in Chesapeake Lodging Trust (NYSE:CHSP), which was worth $6.1 million at the end of the first quarter. On the second spot was Citadel Investment Group which amassed $5.7 million worth of shares. Moreover, Marshall Wace LLP, Renaissance Technologies, and Two Sigma Advisors were also bullish on Chesapeake Lodging Trust (NYSE:CHSP), allocating a large percentage of their portfolios to this stock.
Due to the fact that Chesapeake Lodging Trust (NYSE:CHSP) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there were a few hedgies that decided to sell off their full holdings heading into Q3. It's worth mentioning that D. E. Shaw's D E Shaw cut the biggest position of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $1 million in stock. David Harding's fund, Winton Capital Management, also dumped its stock, about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Chesapeake Lodging Trust (NYSE:CHSP) but similarly valued. These stocks are Instructure, Inc. (NYSE:INST), Kaiser Aluminum Corp. (NASDAQ:KALU), The Simply Good Foods Company (NASDAQ:SMPL), and Papa John's International, Inc. (NASDAQ:PZZA). This group of stocks' market valuations are closest to CHSP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INST,24,454616,2 KALU,19,134499,5 SMPL,22,202596,-3 PZZA,22,361199,-1 Average,21.75,288228,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $288 million. That figure was $23 million in CHSP's case. Instructure, Inc. (NYSE:INST) is the most popular stock in this table. On the other hand Kaiser Aluminum Corp. (NASDAQ:KALU) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Chesapeake Lodging Trust (NYSE:CHSP) is even less popular than KALU. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on CHSP, though not to the same extent, as the stock returned 4% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.