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The markets have been expecting a significant global slowdown in 2012. The stock market losses in developed and developing countries reached double digits in 2011. The markets already started to price in a slowdown and some of the cyclical stocks underperformed the market as a result. We are more optimistic about the growth rates in 2012. We think that cyclical stocks such as hotels and resorts stocks offer asymmetric risk-return characteristics. We use hedge fund ownership as an indicator of investment attractiveness.

In this article we prepared a list of top hotels and resorts stocks that attract most hedge funds. Each of the 7 stocks has at least $5 billion market cap, and was held by more than ten hedge funds as of the end of September.

Company

Ticker

No. of hedge funds

Return

Las Vegas Sands Corp.

LVS

42

28%

Wynn Resorts, Ltd.

WYNN

31

10%

Starwood Hotels & Resorts Worldwide, Inc.

HOT

27

-20%

Wyndham Worldwide Corp

WYN

27

29%

MGM Resorts International

MGM

24

-30%

Melco Crown Entertainment Ltd.

MPEL

23

53%

Marriot International

MAR

19

-29%

1. Las Vegas Sands Corp. (LVS): This company operates several hotels and entertainment centers in Las Vegas and Macao. It has a market cap of more than $32 billion and is currently trading at $44.35. The stock advanced a whopping 28% in the past year, and attracted more hedge funds than any other hotels & resorts stocks did in our tracking list. Totally 42 hedge funds invested in LVS in the third quarter. The largest stakeholder was Stephen Mandel whose Lone Pine Capital initiated a new position in the stock during the third quarter, buying 7.37 million shares (see Stephen Mandel’s top stock picks).

2. Wynn Resorts, Ltd. (WYNN): Wynn Resorts has a market cap of $14 billion and is trading at about $115. Wynn Resorts gained nearly 10% in 2011 and managed to beat the S&P500 index. In the third quarter 31 funds held the stock. Ken Heebner’s Capital Growth Management had 628 thousand shares worth more than $72 million. The firm didn’t make change to its position after the second quarter.

3. Starwood Hotels & Resorts Worldwide, Inc. (HOT): Starwood provides hotel and leisure services through its subsidiaries worldwide. It has a nearly $10 billion market cap and is now trading at about $50 per share. The stock lost 20% in the past year. Among 27 hedge funds that had the stock in the third quarter, Clint Carlson’s Carlson Capital held the largest chunk, with about 1.35 million shares. That figure was after the firm reduced its position by 1% during Q3.

4. Wyndham Worldwide Corp (WYN): Wyndham is a hospitality company which provides hospitality services and products. It has a market cap of nearly $6 billion. The stock is now approaching $38, and gained 29% in 2011. Twenty-seven hedge funds held WYN in the third quarter. Stephen Mandel’s Lone Pine Capital had the most shares of WYN among the hedge funds we track, with 7.64 million shares as of the end of September. This was after the 14% increase in the firm’s position.

5. MGM Resorts International (MGM): This company mainly operates casino resorts, including gaming, hotel, dining, entertainment, retail and other resort amenities. The stock has a market cap of $5.3 billion and is currently trading at about $11 per share. 24 hedge funds' portfolios held MGM in the third quarter. John Paulson’s Paulson & Co had about 78 million shares of MGM – that was after the 1% increase it made in Q3. Paulson might not be happy about MGM since the stock slid nearly 30% in 2011 (see billionaire John Paulson’s favorite stocks).

6. Melco Crown Entertainment Ltd. (MPEL): Melco Crown operates casino gaming and entertainment resort facilities. The stock trades at about $10 per share and has a market cap of $5.3 billion. The stock was the biggest winner in this list. It skyrocketed in 2011 and returned about 53%. Twenty-three hedge funds invested in MPEL in the third quarter. Bain Capital’s Brookside Capital had the most shares of MPEL, a position which the firm initiated during Q3, with more than 12 million shares (see Bain Capital’s top stock picks).

7. Marriot International (MAR): Marriot is a hotels and related lodging facilities operator. The stock lost 29% in 2011 and is now trading at $30. It has a $10 billion market cap. In the third quarter Marriot was in 19 hedge funds’ portfolios. Ricky Sandler’s Eminence Capital initiated a new position of 2.62 million shares during the third quarter.

Source: Hotel And Resort Stocks Hedge Funds Love