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Is RLJ Lodging Trust (RLJ) A Good Stock To Buy?

Asma UL Husna

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. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article we look at what those investors think of RLJ Lodging Trust (NYSE:RLJ).

RLJ Lodging Trust (NYSE:RLJ) has seen a decrease in hedge fund sentiment recently. RLJ was in 19 hedge funds' portfolios at the end of the third quarter of 2019. There were 21 hedge funds in our database with RLJ positions at the end of the previous quarter. Our calculations also showed that RLJ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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_221556" align="aligncenter" width="450"] Richard Driehaus of Driehaus Capital[/caption]

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the latest hedge fund action surrounding RLJ Lodging Trust (NYSE:RLJ).

What have hedge funds been doing with RLJ Lodging Trust (NYSE:RLJ)?

At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RLJ over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in RLJ Lodging Trust (NYSE:RLJ), which was worth $46.4 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $42.7 million worth of shares. Forward Management, Kettle Hill Capital Management, and Renaissance Technologies 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 Forward Management allocated the biggest weight to RLJ Lodging Trust (NYSE:RLJ), around 2.36% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, earmarking 2.13 percent of its 13F equity portfolio to RLJ.

Judging by the fact that RLJ Lodging Trust (NYSE:RLJ) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few hedge funds that elected to cut their entire stakes in the third quarter. It's worth mentioning that Jeffrey Furber's AEW Capital Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $26.4 million in stock, and Greg Poole's Echo Street Capital Management was right behind this move, as the fund dropped about $11 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks similar to RLJ Lodging Trust (NYSE:RLJ). These stocks are Itron, Inc. (NASDAQ:ITRI), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), Albany International Corp. (NYSE:AIN), and Sensient Technologies Corporation (NYSE:SXT). This group of stocks' market values resemble RLJ's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITRI,23,435552,1 TARO,10,77317,0 AIN,12,82477,-3 SXT,15,69055,3 Average,15,166100,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $149 million in RLJ's case. Itron, Inc. (NASDAQ:ITRI) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 10 bullish hedge fund positions. RLJ Lodging Trust (NYSE:RLJ) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RLJ wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RLJ were disappointed as the stock returned 0.6% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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

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