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Were Hedge Funds Right About Booking Holdings Inc. (BKNG)?

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In this article you are going to find out whether hedge funds think Booking Holdings Inc. (NASDAQ:BKNG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Booking Holdings Inc. (NASDAQ:BKNG) has seen a decrease in hedge fund interest in recent months. Booking Holdings Inc. (NASDAQ:BKNG) was in 103 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 113. There were 108 hedge funds in our database with BKNG positions at the end of the fourth quarter. Our calculations also showed that BKNG ranked 18th among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you'd ask most market participants, hedge funds are perceived as unimportant, old financial vehicles of years past. While there are greater than 8000 funds in operation today, We hone in on the top tier of this group, around 850 funds. These hedge fund managers handle most of all hedge funds' total capital, and by shadowing their matchless investments, Insider Monkey has uncovered numerous investment strategies that have historically outpaced the market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website.

Daniel Sundheim D1 Capital
Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a look at the recent hedge fund action encompassing Booking Holdings Inc. (NASDAQ:BKNG).

Do Hedge Funds Think BKNG Is A Good Stock To Buy Now?

At Q1's end, a total of 103 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. By comparison, 90 hedge funds held shares or bullish call options in BKNG a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Is BKNG A Good Stock To Buy?
Is BKNG A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of Booking Holdings Inc. (NASDAQ:BKNG), with a stake worth $781.2 million reported as of the end of March. Trailing Citadel Investment Group was Alkeon Capital Management, which amassed a stake valued at $640.7 million. Ako Capital, GuardCap Asset Management, and D1 Capital Partners 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 Jeneq Management allocated the biggest weight to Booking Holdings Inc. (NASDAQ:BKNG), around 19.24% of its 13F portfolio. GuardCap Asset Management is also relatively very bullish on the stock, setting aside 10.21 percent of its 13F equity portfolio to BKNG.

Due to the fact that Booking Holdings Inc. (NASDAQ:BKNG) has faced a decline in interest from the smart money, it's safe to say that there lies a certain "tier" of fund managers that decided to sell off their positions entirely in the first quarter. It's worth mentioning that Andreas Halvorsen's Viking Global sold off the biggest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $419.4 million in stock. Anand Desai's fund, Darsana Capital Partners, also dumped its stock, about $200.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds in the first quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Booking Holdings Inc. (NASDAQ:BKNG) but similarly valued. We will take a look at Advanced Micro Devices, Inc. (NASDAQ:AMD), Altria Group Inc (NYSE:MO), Zoom Video Communications, Inc. (NASDAQ:ZM), Stryker Corporation (NYSE:SYK), GlaxoSmithKline plc (NYSE:GSK), Vale SA (NYSE:VALE), and British American Tobacco plc (NYSE:BTI). This group of stocks' market caps resemble BKNG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMD,62,3703315,-12 MO,38,1109493,1 ZM,54,5672277,-5 SYK,46,3154010,2 GSK,25,1359731,-5 VALE,31,2615665,-4 BTI,14,1034777,4 Average,38.6,2664181,-2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $2664 million. That figure was $6810 million in BKNG's case. Advanced Micro Devices, Inc. (NASDAQ:AMD) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Booking Holdings Inc. (NASDAQ:BKNG) is more popular among hedge funds. Our overall hedge fund sentiment score for BKNG is 88.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Unfortunately BKNG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BKNG were disappointed as the stock returned -6.3% since the end of the first quarter (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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