Were Hedge Funds Right About Hyatt Hotels Corporation?

After several tireless days, we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Hyatt Hotels Corporation.

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Image by Rodrigo Salomón Cañas from Pixabay 

Hedge fund interest in Hyatt Hotels Corporation (NYSE:H) shares was flat at the end of the second quarter. This is usually a negative indicator. Our calculations also showed that H isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Gold Fields Limited (NYSE:GFI), ITT Inc. (NYSE:ITT), and MasTec, Inc. (NYSE:MTZ) to gather more data points.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 79 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.

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

Heading into the third quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with a bullish position in H over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is H A Good Stock To Buy?

The largest stake in Hyatt Hotels Corporation was held by Melvin Capital Management, which reported holding $283.4 million worth of stock at the end of June. It was followed by Southeastern Asset Management with a $269.3 million position. Other investors bullish on the company included Highside Global Management, Balyasny Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position, Highside Global Management allocated the biggest weight to Hyatt Hotels Corporation, around 7.89% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, setting aside 5.42 percent of its 13F equity portfolio to H.

Since Hyatt Hotels Corporation has faced declining sentiment from the smart money, logic holds that there is a sect of hedge funds that slashed their entire stakes in the second quarter. Interestingly, Robert Pohly’s Samlyn Capital sold off the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $7.6 million in stock. Karim Abbadi and Edward McBride’s fund, Centiva Capital, also said goodbye to its stock, about $0.9 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Hyatt Hotels Corporation (but similarly valued. We will take a look at Gold Fields Limited (NYSE:GFI), ITT Inc. (NYSE:ITT), MasTec, Inc. (NYSE:MTZ), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), New Fortress Energy LLC (NASDAQ:NFE), Woodward Inc (NASDAQ:WWD), and Globus Medical Inc (NYSE:GMED). All of these stocks’ market caps are closest to H’s market cap.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $661 million in H’s case. MasTec, Inc. (NYSE:MTZ) is the most popular stock in this table. On the other hand, New Fortress Energy LLC (NASDAQ:NFE) is the least popular one with only 9 bullish hedge fund positions. Hyatt Hotels Corporation is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for H is 46.5. Stocks with a 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on H as the stock returned 17.9% since the end of the second quarter (through 11/5) and outperformed the market by an even larger margin.

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