In this article we will check out the progression of hedge fund sentiment towards Expedia Group, Inc. (NASDAQ:EXPE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Expedia Group, Inc. (NASDAQ:EXPE) the right investment to pursue these days? Prominent investors are selling. The number of bullish hedge fund positions were cut by 18 lately. Our calculations also showed that EXPE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 44 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_792409" align="aligncenter" width="397"] Brad Gerstner of Altimeter Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to check out the new hedge fund action surrounding Expedia Group, Inc. (NASDAQ:EXPE).
What have hedge funds been doing with Expedia Group, Inc. (NASDAQ:EXPE)?
At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EXPE over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Expedia Group, Inc. (NASDAQ:EXPE) was held by Melvin Capital Management, which reported holding $479.7 million worth of stock at the end of September. It was followed by PAR Capital Management with a $222.4 million position. Other investors bullish on the company included Altimeter Capital Management, Citadel Investment Group, and Melvin Capital Management. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to Expedia Group, Inc. (NASDAQ:EXPE), around 9.6% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, setting aside 9.44 percent of its 13F equity portfolio to EXPE.
Judging by the fact that Expedia Group, Inc. (NASDAQ:EXPE) has faced declining sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedgies that decided to sell off their full holdings in the third quarter. At the top of the heap, Renaissance Technologies dropped the biggest investment of all the hedgies watched by Insider Monkey, worth an estimated $100.2 million in stock, and Jacob Mitchell's Antipodes Partners was right behind this move, as the fund dumped about $64.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 18 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Expedia Group, Inc. (NASDAQ:EXPE) but similarly valued. We will take a look at Crown Holdings, Inc. (NYSE:CCK), Zscaler, Inc. (NASDAQ:ZS), Everest Re Group Ltd (NYSE:RE), and MGM Growth Properties LLC (NYSE:MGP). This group of stocks' market values match EXPE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCK,56,1217305,-2 ZS,27,274887,9 RE,27,558232,3 MGP,28,546863,-1 Average,34.5,649322,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $649 million. That figure was $1551 million in EXPE's case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Zscaler, Inc. (NASDAQ:ZS) is the least popular one with only 27 bullish hedge fund positions. Expedia Group, Inc. (NASDAQ:EXPE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on EXPE as the stock returned 41.2% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.