Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Wynn Resorts, Limited (NASDAQ:WYNN).
Wynn Resorts, Limited (NASDAQ:WYNN) was in 44 hedge funds’ portfolios at the end of the fourth quarter of 2019. WYNN shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 38 hedge funds in our database with WYNN positions at the end of the previous quarter. Our calculations also showed that WYNN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the key hedge fund action surrounding Wynn Resorts, Limited (NASDAQ:WYNN).
What have hedge funds been doing with Wynn Resorts, Limited (NASDAQ:WYNN)?
At Q4’s end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. On the other hand, there were a total of 46 hedge funds with a bullish position in WYNN a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Melvin Capital Management was the largest shareholder of Wynn Resorts, Limited (NASDAQ:WYNN), with a stake worth $354 million reported as of the end of September. Trailing Melvin Capital Management was OZ Management, which amassed a stake valued at $162.2 million. Egerton Capital Limited, Citadel Investment Group, and Melvin 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 Columbus Hill Capital Management allocated the biggest weight to Wynn Resorts, Limited (NASDAQ:WYNN), around 5.53% of its 13F portfolio. MIK Capital is also relatively very bullish on the stock, earmarking 4.19 percent of its 13F equity portfolio to WYNN.
Consequently, key hedge funds were leading the bulls’ herd. Candlestick Capital Management, managed by Jack Woodruff, created the most outsized position in Wynn Resorts, Limited (NASDAQ:WYNN). Candlestick Capital Management had $27.3 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also initiated a $15.6 million position during the quarter. The other funds with brand new WYNN positions are Gregg Moskowitz’s Interval Partners, Kamyar Khajavi’s MIK Capital, and Gavin Baker’s Atreides Management.
Let’s now review hedge fund activity in other stocks similar to Wynn Resorts, Limited (NASDAQ:WYNN). These stocks are Campbell Soup Company (NYSE:CPB), Diamondback Energy Inc (NASDAQ:FANG), Celanese Corporation (NYSE:CE), and CNH Industrial NV (NYSE:CNHI). This group of stocks’ market valuations are closest to WYNN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPB | 29 | 1025914 | -5 |
| FANG | 44 | 712696 | 0 |
| CE | 31 | 924932 | 10 |
| CNHI | 16 | 333220 | -1 |
| Average | 30 | 749191 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $749 million. That figure was $1067 million in WYNN’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 16 bullish hedge fund positions. Wynn Resorts, Limited (NASDAQ:WYNN) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately WYNN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on WYNN were disappointed as the stock returned -60.2% during the same time period 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.
