How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Marriott International Inc (NASDAQ:MAR) and determine whether hedge funds had an edge regarding this stock.
Marriott International Inc (NASDAQ:MAR) has seen an increase in support from the world's most elite money managers lately. Marriott International Inc (NASDAQ:MAR) was in 48 hedge funds' portfolios at the end of June. The all time high for this statistics is 47. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MAR isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
GLENVIEW CAPITAL
Larry Robbins of Glenview CapitalLarry Robbins
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let's take a look at the fresh hedge fund action encompassing Marriott International Inc (NASDAQ:MAR).
What have hedge funds been doing with Marriott International Inc (NASDAQ:MAR)?
Heading into the third quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the first quarter of 2020. By comparison, 27 hedge funds held shares or bullish call options in MAR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Eagle Capital Management held the most valuable stake in Marriott International Inc (NASDAQ:MAR), which was worth $1181.2 million at the end of the third quarter. On the second spot was Ako Capital which amassed $171.8 million worth of shares. Soroban Capital Partners, First Pacific Advisors LLC, and Renaissance Technologies 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 BlueDrive Global Investors allocated the biggest weight to Marriott International Inc (NASDAQ:MAR), around 7.12% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, setting aside 5.62 percent of its 13F equity portfolio to MAR.
As aggregate interest increased, key money managers have been driving this bullishness. Soroban Capital Partners, managed by Eric W. Mandelblatt and Gaurav Kapadia, created the biggest position in Marriott International Inc (NASDAQ:MAR). Soroban Capital Partners had $115 million invested in the company at the end of the quarter. Larry Robbins's Glenview Capital also initiated a $61.9 million position during the quarter. The following funds were also among the new MAR investors: Martin Taylor's Crake Asset Management, Hyder Ahmad's Broad Peak Investment Holdings, and John Khoury's Long Pond Capital.
Let's also examine hedge fund activity in other stocks similar to Marriott International Inc (NASDAQ:MAR). These stocks are ResMed Inc. (NYSE:RMD), SYSCO Corporation (NYSE:SYY), Cintas Corporation (NASDAQ:CTAS), WEC Energy Group, Inc. (NYSE:WEC), The Clorox Company (NYSE:CLX), Verisk Analytics, Inc. (NASDAQ:VRSK), and IAC/InterActiveCorp (NASDAQ:IAC). All of these stocks' market caps resemble MAR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMD,25,224162,-8 SYY,42,2177488,7 CTAS,34,531899,-8 WEC,30,290696,1 CLX,36,1488687,-5 VRSK,36,981827,5 IAC,60,4955863,3 Average,37.6,1521517,-0.7 [/table]
As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $1522 million. That figure was $2159 million in MAR's case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand ResMed Inc. (NYSE:RMD) is the least popular one with only 25 bullish hedge fund positions. Marriott International Inc (NASDAQ:MAR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MAR is 68.9. 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. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on MAR as the stock returned 20% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
