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In this article we will check out the progression of hedge fund sentiment towards Wyndham Hotels & Resorts, Inc. (NYSE:WH) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Wyndham Hotels & Resorts, Inc. (NYSE:WH) shareholders have witnessed a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that WH isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 51 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Jeffrey Gates of Gates Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the latest hedge fund action encompassing Wyndham Hotels & Resorts, Inc. (NYSE:WH).
How are hedge funds trading Wyndham Hotels & Resorts, Inc. (NYSE:WH)?
At Q1's end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WH over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, John Khoury's Long Pond Capital has the most valuable position in Wyndham Hotels & Resorts, Inc. (NYSE:WH), worth close to $159.7 million, amounting to 8.2% of its total 13F portfolio. Sitting at the No. 2 spot is Gates Capital Management, managed by Jeffrey Gates, which holds a $55.8 million position; 3.7% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish contain Ken Griffin's Citadel Investment Group, D. E. Shaw's D E Shaw and Brett Barakett's Tremblant Capital. In terms of the portfolio weights assigned to each position Solel Partners allocated the biggest weight to Wyndham Hotels & Resorts, Inc. (NYSE:WH), around 12.81% of its 13F portfolio. Impactive Capital is also relatively very bullish on the stock, earmarking 11.8 percent of its 13F equity portfolio to WH.
Judging by the fact that Wyndham Hotels & Resorts, Inc. (NYSE:WH) has witnessed a decline in interest from hedge fund managers, logic holds that there lies a certain "tier" of money managers who sold off their entire stakes by the end of the first quarter. It's worth mentioning that Alex Duran and Scott Hendrickson's Permian Investment Partners cut the biggest position of all the hedgies tracked by Insider Monkey, comprising about $82.1 million in stock. Martin Taylor's fund, Crake Asset Management, also dropped its stock, about $28.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 13 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks similar to Wyndham Hotels & Resorts, Inc. (NYSE:WH). These stocks are Valley National Bancorp (NASDAQ:VLY), Perspecta Inc. (NYSE:PRSP), Ollie's Bargain Outlet Holdings Inc (NASDAQ:OLLI), and Iridium Communications Inc. (NASDAQ:IRDM). 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 VLY,22,24789,-2 PRSP,32,326939,-14 OLLI,19,96475,-9 IRDM,20,228723,0 Average,23.25,169232,-6.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $501 million in WH's case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand Ollie's Bargain Outlet Holdings Inc (NASDAQ:OLLI) is the least popular one with only 19 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 calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on WH as the stock returned 45.8% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.