We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Monarch Casino & Resort, Inc. (NASDAQ:MCRI).
Monarch Casino & Resort, Inc. (NASDAQ:MCRI) investors should be aware of an increase in hedge fund sentiment in recent months. Our calculations also showed that MCRI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
John Overdeck of Two Sigma Advisors
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 based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s check out the fresh hedge fund action regarding Monarch Casino & Resort, Inc. (NASDAQ:MCRI).
How are hedge funds trading Monarch Casino & Resort, Inc. (NASDAQ:MCRI)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MCRI over the last 17 quarters. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Monarch Casino & Resort, Inc. (NASDAQ:MCRI) was held by Park West Asset Management, which reported holding $61.7 million worth of stock at the end of September. It was followed by Lafitte Capital Management with a $40.8 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Lafitte Capital Management allocated the biggest weight to Monarch Casino & Resort, Inc. (NASDAQ:MCRI), around 23.28% of its 13F portfolio. Park West Asset Management is also relatively very bullish on the stock, dishing out 3.01 percent of its 13F equity portfolio to MCRI.
As industrywide interest jumped, some big names were breaking ground themselves. Winton Capital Management, managed by David Harding, created the most outsized position in Monarch Casino & Resort, Inc. (NASDAQ:MCRI). Winton Capital Management had $1.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new MCRI position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s go over hedge fund activity in other stocks similar to Monarch Casino & Resort, Inc. (NASDAQ:MCRI). We will take a look at Thermon Group Holdings, Inc. (NYSE:THR), Urstadt Biddle Properties Inc. (NYSE:UBP), Gladstone Commercial Corporation (NASDAQ:GOOD), and Univest Financial Corporation (NASDAQ:UVSP). This group of stocks’ market caps match MCRI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THR | 12 | 39394 | 2 |
| UBP | 2 | 12793 | 0 |
| GOOD | 5 | 72623 | 0 |
| UVSP | 10 | 50323 | 1 |
| Average | 7.25 | 43783 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $117 million in MCRI’s case. Thermon Group Holdings, Inc. (NYSE:THR) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc. (NYSE:UBP) is the least popular one with only 2 bullish hedge fund positions. Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MCRI, though not to the same extent, as the stock returned 9.4% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
