"Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value," are the words of Maran Capital's Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Pebblebrook Hotel Trust (NYSE:PEB) and see how it was affected.
Is Pebblebrook Hotel Trust (NYSE:PEB) a buy, sell, or hold? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund positions moved up by 1 recently. Our calculations also showed that PEB isn't among the 30 most popular stocks among hedge funds. PEB was in 12 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 11 hedge funds in our database with PEB holdings 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 32 percentage points since May 2014 through March 12, 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.
We're going to take a glance at the latest hedge fund action encompassing Pebblebrook Hotel Trust (NYSE:PEB).
Hedge fund activity in Pebblebrook Hotel Trust (NYSE:PEB)
At Q4's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in PEB a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in Pebblebrook Hotel Trust (NYSE:PEB), which was worth $22.7 million at the end of the third quarter. On the second spot was ExodusPoint Capital which amassed $13.5 million worth of shares. Moreover, Two Sigma Advisors, Echo Street Capital Management, and Balyasny Asset Management were also bullish on Pebblebrook Hotel Trust (NYSE:PEB), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, established the biggest position in Pebblebrook Hotel Trust (NYSE:PEB). D E Shaw had $22.7 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $13.5 million investment in the stock during the quarter. The following funds were also among the new PEB investors: David Costen Haley's HBK Investments and Bruce Kovner's Caxton Associates LP.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Pebblebrook Hotel Trust (NYSE:PEB) but similarly valued. These stocks are The New York Times Company (NYSE:NYT), Telephone & Data Systems, Inc. (NYSE:TDS), Shell Midstream Partners LP (NYSE:SHLX), and Alteryx, Inc. (NYSE:AYX). All of these stocks' market caps are similar to PEB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NYT,32,820804,-2 TDS,22,433911,2 SHLX,8,25882,2 AYX,29,526112,3 Average,22.75,451677,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $452 million. That figure was $79 million in PEB's case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 8 bullish hedge fund positions. Pebblebrook Hotel Trust (NYSE:PEB) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately PEB wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); PEB investors were disappointed as the stock returned 8.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.