Do Hedge Funds Love Travel + Leisure Co. (TNL)?

In this article you are going to find out whether hedge funds think Travel + Leisure Co. (NYSE:TNL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Travel + Leisure Co. (NYSE:TNL) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds’ portfolios at the end of June. Our calculations also showed that TNL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare TNL to other stocks including Flowers Foods, Inc. (NYSE:FLO), Signify Health, Inc. (NYSE:SGFY), and CIT Group Inc. (NYSE:CIT) to get a better sense of its popularity.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Lee Ainslie's Top 10 Stock Picks

Lee Ainslie’s Top 10 Stock Picks

Lee Ainslie of Maverick Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a glance at the key hedge fund action surrounding Travel + Leisure Co. (NYSE:TNL).

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

At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. On the other hand, there were a total of 34 hedge funds with a bullish position in TNL 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.

More specifically, Iridian Asset Management was the largest shareholder of Travel + Leisure Co. (NYSE:TNL), with a stake worth $176.6 million reported as of the end of June. Trailing Iridian Asset Management was Rima Senvest Management, which amassed a stake valued at $121 million. Arrowstreet Capital, Nantahala Capital Management, and D E Shaw 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 Solel Partners allocated the biggest weight to Travel + Leisure Co. (NYSE:TNL), around 6.5% of its 13F portfolio. Strycker View Capital is also relatively very bullish on the stock, designating 5.27 percent of its 13F equity portfolio to TNL.

Due to the fact that Travel + Leisure Co. (NYSE:TNL) has faced a decline in interest from hedge fund managers, it’s safe to say that there were a few fund managers that slashed their entire stakes in the second quarter. Interestingly, Christopher Hillary’s Roubaix Capital dumped the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at about $2.6 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also cut its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Travel + Leisure Co. (NYSE:TNL). We will take a look at Flowers Foods, Inc. (NYSE:FLO), Signify Health, Inc. (NYSE:SGFY), CIT Group Inc. (NYSE:CIT), Switch, Inc. (NYSE:SWCH), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Science Applications International Corp (NYSE:SAIC), and Chesapeake Energy Corporation (NASDAQ:CHK). This group of stocks’ market valuations match TNL’s market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FLO,21,283246,-5 SGFY,13,167408,-15 CIT,30,751796,2 SWCH,16,243201,6 APLS,31,877120,-3 SAIC,22,271138,4 CHK,43,1914857,1 Average,25.1,644109,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $644 million. That figure was $669 million in TNL’s case. Chesapeake Energy Corporation (NYSE:CHK) is the most popular stock in this table. On the other hand Signify Health, Inc. (NYSE:SGFY) is the least popular one with only 13 bullish hedge fund positions. Travel + Leisure Co. (NYSE:TNL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TNL is 59.8. 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 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately TNL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TNL were disappointed as the stock returned -7.5% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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