Were Hedge Funds Right About Apple Hospitality REIT Inc (APLE)?

·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Apple Hospitality REIT Inc (NYSE:APLE).

Apple Hospitality REIT Inc (NYSE:APLE) has experienced an increase in hedge fund sentiment in recent months. Apple Hospitality REIT Inc (NYSE:APLE) was in 17 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 16. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that APLE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the eyes of most investors, hedge funds are seen as underperforming, old investment vehicles of years past. While there are greater than 8000 funds in operation today, We look at the masters of this club, about 850 funds. These investment experts administer most of the hedge fund industry's total asset base, and by keeping an eye on their first-class equity investments, Insider Monkey has uncovered numerous investment strategies that have historically beaten the market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Michael Weinstock - Monarch Alternative Capital
Michael Weinstock - Monarch Alternative Capital

Michael Weinstock of Monarch Alternative Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. With all of this in mind we're going to review the key hedge fund action surrounding Apple Hospitality REIT Inc (NYSE:APLE).

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

At first quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in APLE a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Monarch Alternative Capital was the largest shareholder of Apple Hospitality REIT Inc (NYSE:APLE), with a stake worth $77 million reported as of the end of March. Trailing Monarch Alternative Capital was Millennium Management, which amassed a stake valued at $41.3 million. Citadel Investment Group, Renaissance Technologies, and Masterton Capital Management 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 Masterton Capital Management allocated the biggest weight to Apple Hospitality REIT Inc (NYSE:APLE), around 6.94% of its 13F portfolio. Monarch Alternative Capital is also relatively very bullish on the stock, dishing out 5.22 percent of its 13F equity portfolio to APLE.

Consequently, some big names were breaking ground themselves. Hill Winds Capital, managed by Matthew Crandall Gilman, created the most valuable position in Apple Hospitality REIT Inc (NYSE:APLE). Hill Winds Capital had $0.8 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also initiated a $0.6 million position during the quarter. The following funds were also among the new APLE investors: John Overdeck and David Siegel's Two Sigma Advisors, Donald Sussman's Paloma Partners, and Mika Toikka's AlphaCrest Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Apple Hospitality REIT Inc (NYSE:APLE) but similarly valued. These stocks are Casella Waste Systems Inc. (NASDAQ:CWST), Energizer Holdings, Inc. (NYSE:ENR), CNO Financial Group Inc (NYSE:CNO), Ingevity Corporation (NYSE:NGVT), Cathay General Bancorp (NASDAQ:CATY), Turquoise Hill Resources Ltd (NYSE:TRQ), and Canaan Inc. (NASDAQ:CAN). This group of stocks' market caps match APLE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CWST,20,107302,1 ENR,22,237518,-4 CNO,18,380221,1 NGVT,20,280427,-4 CATY,12,130599,2 TRQ,13,575312,1 CAN,9,47017,5 Average,16.3,251199,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $203 million in APLE's case. Energizer Holdings, Inc. (NYSE:ENR) is the most popular stock in this table. On the other hand Canaan Inc. (NASDAQ:CAN) is the least popular one with only 9 bullish hedge fund positions. Apple Hospitality REIT Inc (NYSE:APLE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APLE is 66.8. 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately APLE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on APLE were disappointed as the stock returned 0.3% since the end of March (through 7/23) 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.

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