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Is WH A Good Stock To Buy According To Hedge Funds?

Debasis Saha
·6 min read

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Wyndham Hotels & Resorts, Inc. (NYSE:WH).

Is WH a good stock to buy? Wyndham Hotels & Resorts, Inc. (NYSE:WH) has experienced a decrease in enthusiasm from smart money in recent months. Wyndham Hotels & Resorts, Inc. (NYSE:WH) was in 33 hedge funds' portfolios at the end of September. The all time high for this statistic is 44. There were 36 hedge funds in our database with WH holdings at the end of June. Our calculations also showed that WH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are many tools market participants put to use to value stocks. A pair of the most useful tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the market by a healthy amount (see the details here).

David Harding
David Harding

David Harding of Winton Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to take a glance at the recent hedge fund action encompassing Wyndham Hotels & Resorts, Inc. (NYSE:WH).

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

At Q3's end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 40 hedge funds with a bullish position in WH a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WH A Good Stock To Buy?
Is WH A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of Wyndham Hotels & Resorts, Inc. (NYSE:WH), with a stake worth $86.4 million reported as of the end of September. Trailing Citadel Investment Group was Gates Capital Management, which amassed a stake valued at $80.7 million. Tremblant Capital, Long Pond Capital, and East Side Capital (RR 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 Impactive Capital allocated the biggest weight to Wyndham Hotels & Resorts, Inc. (NYSE:WH), around 13.64% of its 13F portfolio. Solel Partners is also relatively very bullish on the stock, designating 9.26 percent of its 13F equity portfolio to WH.

Due to the fact that Wyndham Hotels & Resorts, Inc. (NYSE:WH) has experienced bearish sentiment from the smart money, we can see that there exists a select few fund managers that slashed their entire stakes in the third quarter. It's worth mentioning that Alexander Mitchell's Scopus Asset Management sold off the largest stake of the "upper crust" of funds watched by Insider Monkey, comprising close to $32 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also cut its stock, about $20.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds in the third quarter.

Let's now take a look at hedge fund activity in other stocks similar to Wyndham Hotels & Resorts, Inc. (NYSE:WH). These stocks are FLIR Systems, Inc. (NASDAQ:FLIR), National Instruments Corporation (NASDAQ:NATI), LG Display Co Ltd. (NYSE:LPL), Jefferies Financial Group Inc. (NYSE:JEF), Brunswick Corporation (NYSE:BC), Owl Rock Capital Corporation (NYSE:ORCC), and East West Bancorp, Inc. (NASDAQ:EWBC). This group of stocks' market values resemble WH's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLIR,25,243308,-13 NATI,22,210864,-13 LPL,7,32638,2 JEF,33,599944,-4 BC,34,734863,-1 ORCC,15,180660,0 EWBC,20,195786,-3 Average,22.3,314009,-4.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $314 million. That figure was $622 million in WH's case. Brunswick Corporation (NYSE:BC) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 7 bullish hedge fund positions. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WH is 72.6. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately WH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WH were disappointed as the stock returned 10.4% since the end of September (through 12/18) 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.

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

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