Is Pebblebrook Hotel Trust (NYSE:PEB) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Pebblebrook Hotel Trust (NYSE:PEB) was in 10 hedge funds' portfolios at the end of the first quarter of 2019. PEB investors should pay attention to a decrease in hedge fund sentiment in recent months. There were 12 hedge funds in our database with PEB positions at the end of the previous quarter. Our calculations also showed that peb isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let's take a glance at the key hedge fund action regarding Pebblebrook Hotel Trust (NYSE:PEB).
What have hedge funds been doing with Pebblebrook Hotel Trust (NYSE:PEB)?
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in PEB a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Pebblebrook Hotel Trust (NYSE:PEB) was held by Zimmer Partners, which reported holding $52.3 million worth of stock at the end of March. It was followed by Echo Street Capital Management with a $8.7 million position. Other investors bullish on the company included Balyasny Asset Management, Two Sigma Advisors, and AQR Capital Management.
Since Pebblebrook Hotel Trust (NYSE:PEB) has faced a decline in interest from the smart money, we can see that there exists a select few hedgies who sold off their full holdings by the end of the third quarter. Interestingly, Michael Gelband's ExodusPoint Capital cut the largest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $13.5 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund said goodbye to about $1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Pebblebrook Hotel Trust (NYSE:PEB). We will take a look at Floor & Decor Holdings, Inc. (NYSE:FND), Healthcare Realty Trust Inc (NYSE:HR), Hutchison China MediTech Limited (NASDAQ:HCM), and Clean Harbors Inc (NYSE:CLH). This group of stocks' market values are closest to PEB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FND,31,406072,12 HR,14,80226,5 HCM,6,8123,1 CLH,27,417279,4 Average,19.5,227925,5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $78 million in PEB's case. Floor & Decor Holdings, Inc. (NYSE:FND) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 6 bullish hedge fund positions. Pebblebrook Hotel Trust (NYSE:PEB) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately PEB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PEB investors were disappointed as the stock returned -6.5% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.