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Were Hedge Funds Right About Warming Up To Hilton Worldwide Holdings (HLT)?

Abigail Fisher

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 34.7% through November 22nd and outperformed the broader market benchmark by 8.5 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Hilton Worldwide Holdings Inc (NYSE:HLT) shareholders have witnessed an increase in support from the world's most elite money managers in recent months. Our calculations also showed that HLT isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

At the moment there are a multitude of tools stock market investors employ to appraise stocks. A duo of the most innovative tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the broader indices by a solid amount (see the details here).

[caption id="attachment_745223" align="aligncenter" width="473"] Daniel Sundheim of D1 Capital Partners[/caption]

Daniel Sundheim D1 Capital

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. Let's take a gander at the recent hedge fund action surrounding Hilton Worldwide Holdings Inc (NYSE:HLT).

Hedge fund activity in Hilton Worldwide Holdings Inc (NYSE:HLT)

Heading into the fourth quarter of 2019, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 45 hedge funds with a bullish position in HLT 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.

HLT_nov2019

More specifically, Pershing Square was the largest shareholder of Hilton Worldwide Holdings Inc (NYSE:HLT), with a stake worth $982.9 million reported as of the end of September. Trailing Pershing Square was D1 Capital Partners, which amassed a stake valued at $561.5 million. Eagle Capital Management, Soroban Capital Partners, and Pelham Capital 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 Pelham Capital allocated the biggest weight to Hilton Worldwide Holdings Inc (NYSE:HLT), around 23.42% of its portfolio. Pershing Square is also relatively very bullish on the stock, setting aside 15.69 percent of its 13F equity portfolio to HLT.

Now, key hedge funds were leading the bulls' herd. Maverick Capital, managed by Lee Ainslie, initiated the most outsized position in Hilton Worldwide Holdings Inc (NYSE:HLT). Maverick Capital had $63 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $50.4 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital, and Donald Sussman's Paloma Partners.

Let's now review hedge fund activity in other stocks similar to Hilton Worldwide Holdings Inc (NYSE:HLT). We will take a look at Sun Life Financial Inc. (NYSE:SLF), Square, Inc. (NYSE:SQ), Southern Copper Corporation (NYSE:SCCO), and Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC). This group of stocks' market values match HLT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLF,12,259612,1 SQ,44,2375472,-9 SCCO,13,175117,-2 ERIC,20,352546,1 Average,22.25,790687,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $791 million. That figure was $3929 million in HLT's case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Hilton Worldwide Holdings Inc (NYSE:HLT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on HLT as the stock returned 8.9% during Q4 (through 11/22) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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