We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Marriott Vacations Worldwide Corporation (NYSE:VAC).
Is Marriott Vacations Worldwide Corporation (NYSE:VAC) a buy here? Investors who are in the know are getting less bullish. The number of long hedge fund bets dropped by 5 recently. Our calculations also showed that VAC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). VAC was in 25 hedge funds' portfolios at the end of December. There were 30 hedge funds in our database with VAC holdings at the end of the previous quarter.
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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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_338182" align="aligncenter" width="399"] Harold Levy of Iridian Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a peek at the latest hedge fund action regarding Marriott Vacations Worldwide Corporation (NYSE:VAC).
What does smart money think about Marriott Vacations Worldwide Corporation (NYSE:VAC)?
At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the third quarter of 2019. On the other hand, there were a total of 26 hedge funds with a bullish position in VAC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Rima Senvest Management, managed by Richard Mashaal, holds the number one position in Marriott Vacations Worldwide Corporation (NYSE:VAC). Rima Senvest Management has a $220.3 million position in the stock, comprising 15% of its 13F portfolio. The second most bullish fund manager is David Cohen and Harold Levy of Iridian Asset Management, with a $115.6 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management, Ken Griffin's Citadel Investment Group and Eric F. Billings's Billings Capital Management. In terms of the portfolio weights assigned to each position Billings Capital Management allocated the biggest weight to Marriott Vacations Worldwide Corporation (NYSE:VAC), around 15.98% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, designating 14.98 percent of its 13F equity portfolio to VAC.
Because Marriott Vacations Worldwide Corporation (NYSE:VAC) has witnessed declining sentiment from the smart money, logic holds that there was a specific group of funds that slashed their entire stakes in the third quarter. At the top of the heap, Brett Barakett's Tremblant Capital dumped the biggest position of all the hedgies watched by Insider Monkey, comprising about $17.5 million in stock. Stephen Loukas, David A. Lorber, Zachary George's fund, FrontFour Capital Group, also said goodbye to its stock, about $6.5 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Marriott Vacations Worldwide Corporation (NYSE:VAC) but similarly valued. We will take a look at Nexstar Media Group, Inc. (NASDAQ:NXST), Primerica, Inc. (NYSE:PRI), The Hanover Insurance Group, Inc. (NYSE:THG), and IDACORP Inc (NYSE:IDA). This group of stocks' market valuations are closest to VAC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXST,40,1488285,5 PRI,28,324417,2 THG,21,224949,-7 IDA,24,342667,3 Average,28.25,595080,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $595 million. That figure was $512 million in VAC's case. Nexstar Media Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand The Hanover Insurance Group, Inc. (NYSE:THG) is the least popular one with only 21 bullish hedge fund positions. Marriott Vacations Worldwide Corporation (NYSE:VAC) 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately VAC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VAC investors were disappointed as the stock returned -58.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.