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Hilton Worldwide (HLT) Has Fallen 2% in Last One Year, Underperforms Market

Alex Smith
·4 min read

If you are looking for the best ideas for your portfolio you may want to consider some of Pershing Square Capital Management's top stock picks. Pershing Square, an investment management firm, is bullish on Hilton Worldwide Holdings Inc. (NYSE:HLT) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Hilton Worldwide Holdings Inc. (NYSE:HLT) stock. Hilton Worldwide Holdings Inc. (NYSE:HLT) is an hospitality company.

On August 13, 2019, Pershing Square had released its Q2 2019 investor letter. The investment firm said that Hilton Worldwide Holdings Inc. (NYSE:HLT) was one of the biggest contributors to its performance for the first six months of 2019. The stock has posted a return of -2.4% in the trailing one year period, underperforming fund's benchmark the S&P 500 Index which returned 22% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, Hilton Worldwide Holdings Inc. (NYSE:HLT) stock has fallen by 17.7%.

Last month, we published an article revealing Pershing Square's bullish investment thesis on Hilton Worldwide Holdings Inc. (NYSE:HLT) stock in its Q2 2020 investor letter. This suggests that the investment firm has been bullish for a long time on Hilton Worldwide Holdings Inc. (NYSE:HLT).

Pershing Square fund posted a return of 45.3% during the first half of 2019, outperforming fund's benchmark the S&P 500 Index which returned 18.5% in the same period. Let’s take a look at comments made by Pershing Square about Hilton Worldwide Holdings Inc. (NYSE:HLT) in the Q2 2019 investor letter.

"Hilton’s most recent quarterly results continue to reinforce our view that the company’s robust value proposition and assetlight, fee-based business model should allow the company to compound earnings per share at a mid-to-high teens’ growth rate for years to come. This past quarter, Hilton grew units more than 7%, contributing to 8% franchised and management revenue growth, 11% EBITDA growth and 21% earnings per share growth (helped by a lower effective tax rate and fewer shares outstanding). Revenue per available room (“RevPAR”) grew 1.4% this quarter, which outperformed the industry, as Hilton continues to gain share in a subdued market environment. Reflecting the asset-light nature of its business model, Hilton modestly increased its 2019 guidance for EBITDA and EPS growth despite lowering the high-end of its RevPAR growth (from +1-3% to +1-2%) due to modestly weakening conditions in the US and China.

We believe that the combination of Hilton’s fee-based business model, large unit development pipeline, substantial share buyback program, and superb management team continue to be under-appreciated by the market as Hilton can achieve strong earnings per share growth even in a weaker environment for revenue per available room. While Hilton’s shares have appreciated 33% this year, the shares currently trade at 23 times consensus analyst estimates for 2019 earnings, a discount to the historical average, and below our estimate of the company’s intrinsic value based upon its high-quality, predictable cashflow stream and strong future growth potential."

DayOwl/Shutterstock.com

In Q1 2020, the number of bullish hedge fund positions on Hilton Worldwide Holdings Inc. (NYSE:HLT) stock decreased by about 25% from the previous quarter (see the chart here), so a number of other hedge fund managers don't seem to agree with Hilton's growth potential. Our calculations showed that Hilton Worldwide Holdings Inc. (NYSE:HLT) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.