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Were Hedge Funds Right About Park Hotels & Resorts Inc. (PK)?

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In this article we will analyze whether Park Hotels & Resorts Inc. (NYSE:PK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Park Hotels & Resorts Inc. (NYSE:PK) a marvelous investment right now? The best stock pickers were getting more optimistic. The number of bullish hedge fund positions inched up by 5 lately. Park Hotels & Resorts Inc. (NYSE:PK) was in 18 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that PK isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 13 hedge funds in our database with PK holdings at the end of December.

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ken Heebner of Capital Growth Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now we're going to take a glance at the new hedge fund action regarding Park Hotels & Resorts Inc. (NYSE:PK).

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

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in PK a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is PK A Good Stock To Buy?
Is PK A Good Stock To Buy?

The largest stake in Park Hotels & Resorts Inc. (NYSE:PK) was held by Capital Growth Management, which reported holding $27.6 million worth of stock at the end of December. It was followed by Chescapmanager LLC with a $21.6 million position. Other investors bullish on the company included Broad Bay Capital, Kettle Hill Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to Park Hotels & Resorts Inc. (NYSE:PK), around 2.59% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, dishing out 2.52 percent of its 13F equity portfolio to PK.

Consequently, some big names were breaking ground themselves. Broad Bay Capital, managed by Richard Scott Greeder, initiated the biggest position in Park Hotels & Resorts Inc. (NYSE:PK). Broad Bay Capital had $14.5 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $5.2 million investment in the stock during the quarter. The other funds with brand new PK positions are Paul Tudor Jones's Tudor Investment Corp, D. E. Shaw's D E Shaw, and Minhua Zhang's Weld Capital Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Park Hotels & Resorts Inc. (NYSE:PK) but similarly valued. These stocks are CIT Group Inc. (NYSE:CIT), Galapagos NV (NASDAQ:GLPG), Avis Budget Group Inc. (NASDAQ:CAR), ASGN Incorporated (NYSE:ASGN), Flowserve Corporation (NYSE:FLS), Cyberark Software Ltd (NASDAQ:CYBR), and Valmont Industries, Inc. (NYSE:VMI). All of these stocks' market caps match PK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIT,28,802021,-3 GLPG,20,167561,8 CAR,21,1724243,-7 ASGN,20,78754,6 FLS,29,174239,8 CYBR,32,502899,5 VMI,23,401266,-3 Average,24.7,550140,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $550 million. That figure was $101 million in PK's case. Cyberark Software Ltd (NASDAQ:CYBR) is the most popular stock in this table. On the other hand Galapagos NV (NASDAQ:GLPG) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Park Hotels & Resorts Inc. (NYSE:PK) is even less popular than GLPG. Our overall hedge fund sentiment score for PK is 25.9. 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. Hedge funds dodged a bullet by taking a bearish stance towards PK. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd but managed to beat the market again by 10.1 percentage points. Unfortunately PK wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); PK investors were disappointed as the stock returned -13.5% since the end of the first quarter (through 7/23) 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.