Baron Funds, an asset management firm, published its “Baron Real Estate Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. The Baron Real Estate Fund (the “Fund”) declined 10.76% (Institutional Shares) in the first quarter of 2022, modestly outperforming its primary benchmark, the MSCI USA IMI Extended Real Estate Index (the “MSCI Real Estate Index”), which declined 11.03%. The Fund underperformed the MSCI US REIT Index (the “REIT Index”), which declined 4.28%. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Baron Real Estate Fund mentioned Six Flags Entertainment Corporation (NYSE:SIX) and explained its insights for the company. Founded in 2010, Six Flags Entertainment Corporation (NYSE:SIX) is an Arlington, Texas-based regional theme park company with a $2.3 billion market capitalization. Six Flags Entertainment Corporation (NYSE:SIX) delivered a -37.58% return since the beginning of the year, while its 12-month returns are down by -38.61%. The stock closed at $26.58 per share on May 24, 2022.
Here is what Baron Real Estate Fund has to say about Six Flags Entertainment Corporation (NYSE:SIX) in its Q1 2022 investor letter:
“The shares of Six Flags Entertainment Corporation increased modestly in the most recent quarter following encouraging business results. The company is the largest operator of regional theme parks in the world with 30 parks across the U.S., Mexico, and Canada and hosts approximately 30 million visitors annually. Six Flags enjoys robust unaided consumer awareness due to its 60-year operating history and enduring brand.
We have recently spent time with newly appointed CEO Selim Bassoul. Selim spent over 20 years as the former CEO of The Middleby Corporation where he engineered a successful turnaround, implementing an accretive acquisition strategy and reinvigorating organic growth. Middleby ultimately grew sales from approximately $100 million to over $2.5 billion at his retirement in 2019. Six Flags also has elements of a turnaround situation, yet also has the ability to leverage its well-known brand and long operating history.
We believe there are multiple avenues to win with Six Flags:
- Attendance growth: Attendance recovery post-COVID has been robust, but we believe there are further opportunities to drive quality guest volume and increase the attendance mix toward higher spending guests.
- Premiumization: We believe Six Flags has tremendous pricing power and is under-monetizing its core offerings. While per capita in-park spending has been strong (growing approximately 30% from 2019 levels), we believe there is further room to drive guest spending through initiatives such as better food and beverage selections and technology adoption (e.g., mobile ordering, ability to pay to skip line, personalization of guest experience). We also believe there is an opportunity to drive ticket pricing through a dynamic pricing model based on the day of the week and point in the season in addition to simplifying the season pass and membership offerings. At approximately $55 per day ($30 admission and $25 in-park spending), Six Flags remains one of the lower cost leisure-entertainment options.
- Corporate initiatives: Selim has proven to be a thoughtful and charismatic leader. We believe there is ample opportunity to reset the company culture, reduce layers of management, make quicker decisions, and empower employees.
We believe a combination of these initiatives as well as others will allow Six Flags to grow cash flow from $500 million in 2021 to approximately $600 million in the near term. As a result, we believe the stock may reach $70 or approximately 80% higher than its recent price in the next few years.”
Copyright: halfpoint / 123RF Stock Photo
Our calculations show that Six Flags Entertainment Corporation (NYSE:SIX) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Six Flags Entertainment Corporation (NYSE:SIX) was in 38 hedge fund portfolios at the end of the first quarter of 2022, compared to 46 funds in the previous quarter. Six Flags Entertainment Corporation (NYSE:SIX) delivered a -39.67% return in the past 3 months.
In May 2022, we published an article that includes Six Flags Entertainment Corporation (NYSE:SIX) in 11 Best Summer Stocks To Buy Now. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
