It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Vail Resorts, Inc. (NYSE:MTN).
Vail Resorts, Inc. (NYSE:MTN) investors should be aware of an increase in hedge fund interest lately. MTN was in 35 hedge funds’ portfolios at the end of the third quarter of 2019. There were 33 hedge funds in our database with MTN positions at the end of the previous quarter. Our calculations also showed that MTN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ric Dillon of Diamond Hill Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a gander at the recent hedge fund action surrounding Vail Resorts, Inc. (NYSE:MTN).
What does smart money think about Vail Resorts, Inc. (NYSE:MTN)?
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MTN over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the number one position in Vail Resorts, Inc. (NYSE:MTN), worth close to $107.7 million, amounting to 0.6% of its total 13F portfolio. The second largest stake is held by Select Equity Group, managed by Robert Joseph Caruso, which holds a $68.5 million position; 0.5% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions consist of Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Paul Marshall and Ian Wace’s Marshall Wace and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Lansing Management allocated the biggest weight to Vail Resorts, Inc. (NYSE:MTN), around 4.92% of its 13F portfolio. White Elm Capital is also relatively very bullish on the stock, setting aside 4.54 percent of its 13F equity portfolio to MTN.
Consequently, key money managers were breaking ground themselves. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, initiated the largest position in Vail Resorts, Inc. (NYSE:MTN). Shellback Capital had $35.8 million invested in the company at the end of the quarter. Ira Unschuld’s Brant Point Investment Management also made a $9.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vail Resorts, Inc. (NYSE:MTN) but similarly valued. These stocks are Black Knight, Inc. (NYSE:BKI), Omega Healthcare Investors Inc (NYSE:OHI), CPFL Energia S.A. (NYSE:CPL), and OGE Energy Corp. (NYSE:OGE). All of these stocks’ market caps are similar to MTN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BKI | 42 | 883381 | -3 |
| OHI | 18 | 176390 | 1 |
| CPL | 3 | 17897 | -1 |
| OGE | 16 | 201507 | 3 |
| Average | 19.75 | 319794 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $479 million in MTN’s case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand CPFL Energia S.A. (NYSE:CPL) is the least popular one with only 3 bullish hedge fund positions. Vail Resorts, Inc. (NYSE:MTN) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately MTN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MTN were disappointed as the stock returned 19.3% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
