Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Host Hotels and Resorts Inc (NASDAQ:HST) changed recently.
Is HST a good stock to buy now? The smart money was taking a bearish view. The number of bullish hedge fund bets were cut by 8 lately. Host Hotels and Resorts Inc (NASDAQ:HST) was in 21 hedge funds' portfolios at the end of September. The all time high for this statistic is 30. Our calculations also showed that HST isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 29 hedge funds in our database with HST holdings at the end of June. 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 66 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.
Parag Vora of HG Vora Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Now we're going to take a gander at the key hedge fund action regarding Host Hotels and Resorts Inc (NASDAQ:HST).
Do Hedge Funds Think HST Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HST over the last 21 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Herb Wagner's FinePoint Capital has the number one position in Host Hotels and Resorts Inc (NASDAQ:HST), worth close to $83.1 million, corresponding to 100% of its total 13F portfolio. The second largest stake is held by Parag Vora of HG Vora Capital Management, with a $29.7 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Ken Griffin's Citadel Investment Group, Jonathan Esfandi's JNE Partners and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position FinePoint Capital allocated the biggest weight to Host Hotels and Resorts Inc (NASDAQ:HST), around 100% of its 13F portfolio. JNE Partners is also relatively very bullish on the stock, setting aside 16.97 percent of its 13F equity portfolio to HST.
Because Host Hotels and Resorts Inc (NASDAQ:HST) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers that decided to sell off their full holdings last quarter. At the top of the heap, Greg Poole's Echo Street Capital Management dumped the biggest investment of all the hedgies tracked by Insider Monkey, worth close to $39.5 million in stock. John Khoury's fund, Long Pond Capital, also dumped its stock, about $27.9 million worth. These transactions are interesting, as total hedge fund interest dropped by 8 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Host Hotels and Resorts Inc (NASDAQ:HST) but similarly valued. These stocks are Pentair plc (NYSE:PNR), New Fortress Energy Inc. (NASDAQ:NFE), Exelixis, Inc. (NASDAQ:EXEL), Alteryx, Inc. (NYSE:AYX), F5 Networks, Inc. (NASDAQ:FFIV), JFrog Ltd. (NASDAQ:FROG), and NRG Energy Inc (NYSE:NRG). This group of stocks' market caps are similar to HST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PNR,34,593923,0 NFE,7,15273,2 EXEL,34,1173099,-5 AYX,41,1192864,-7 FFIV,36,806699,-3 FROG,22,288909,22 NRG,32,1086627,-4 Average,29.4,736771,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $737 million. That figure was $212 million in HST's case. Alteryx, Inc. (NYSE:AYX) is the most popular stock in this table. On the other hand New Fortress Energy Inc. (NASDAQ:NFE) is the least popular one with only 7 bullish hedge fund positions. Host Hotels and Resorts Inc (NASDAQ:HST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HST is 38.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on HST as the stock returned 30% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.