In this article you are going to find out whether hedge funds think Despegar.com, Corp. (NYSE:DESP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Despegar.com, Corp. (NYSE:DESP) a healthy stock for your portfolio? Money managers are in an optimistic mood. The number of long hedge fund positions advanced by 5 lately. Our calculations also showed that DESP 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). DESP was in 16 hedge funds' portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with DESP holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26088" align="aligncenter" width="396"] Chase Coleman of Tiger Global[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the new hedge fund action regarding Despegar.com, Corp. (NYSE:DESP).
Hedge fund activity in Despegar.com, Corp. (NYSE:DESP)
Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DESP over the last 18 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Tiger Global Management LLC was the largest shareholder of Despegar.com, Corp. (NYSE:DESP), with a stake worth $52.5 million reported as of the end of September. Trailing Tiger Global Management LLC was Ancient Art (Teton Capital), which amassed a stake valued at $10.7 million. Bares Capital Management, Two Creeks Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ancient Art (Teton Capital) allocated the biggest weight to Despegar.com, Corp. (NYSE:DESP), around 1.72% of its 13F portfolio. Moerus Capital Management is also relatively very bullish on the stock, earmarking 0.39 percent of its 13F equity portfolio to DESP.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Ancient Art (Teton Capital), managed by Quincy Lee, initiated the biggest position in Despegar.com, Corp. (NYSE:DESP). Ancient Art (Teton Capital) had $10.7 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also initiated a $0.9 million position during the quarter. The other funds with brand new DESP positions are Parvinder Thiara's Athanor Capital, Amit Wadhwaney's Moerus Capital Management, and Donald Sussman's Paloma Partners.
Let's go over hedge fund activity in other stocks similar to Despegar.com, Corp. (NYSE:DESP). We will take a look at First Mid Bancshares, Inc. (NASDAQ:FMBH), AngioDynamics, Inc. (NASDAQ:ANGO), Cellectis SA (NASDAQ:CLLS), and Waterstone Financial, Inc. (NASDAQ:WSBF). All of these stocks' market caps are closest to DESP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FMBH,5,7113,-1 ANGO,11,22577,-2 CLLS,10,14864,2 WSBF,12,63778,-1 Average,9.5,27083,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $84 million in DESP's case. Waterstone Financial, Inc. (NASDAQ:WSBF) is the most popular stock in this table. On the other hand First Mid Bancshares, Inc. (NASDAQ:FMBH) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Despegar.com, Corp. (NYSE:DESP) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on DESP as the stock returned 30.7% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.