Hedge Funds Are Cashing Out Of MGM Growth Properties LLC (MGP)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded MGM Growth Properties LLC (NYSE:MGP) based on those filings.

Is MGM Growth Properties LLC (NYSE:MGP) the right pick for your portfolio? Money managers were reducing their bets on the stock. The number of bullish hedge fund positions were trimmed by 5 lately. MGM Growth Properties LLC (NYSE:MGP) was in 29 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 34. Our calculations also showed that MGP isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the fresh hedge fund action encompassing MGM Growth Properties LLC (NYSE:MGP).

Do Hedge Funds Think MGP Is A Good Stock To Buy Now?

At Q2’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MGP over the last 24 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 Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the most valuable position in MGM Growth Properties LLC (NYSE:MGP), worth close to $120.9 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, led by Israel Englander, holding a $62.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish contain Isaac Corre’s Governors Lane, Eduardo Abush’s Waterfront Capital Partners and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position BlueMar Capital Management allocated the biggest weight to MGM Growth Properties LLC (NYSE:MGP), around 6.91% of its 13F portfolio. Governors Lane is also relatively very bullish on the stock, setting aside 3.6 percent of its 13F equity portfolio to MGP.

Judging by the fact that MGM Growth Properties LLC (NYSE:MGP) has witnessed bearish sentiment from the smart money, it’s safe to say that there was a specific group of funds that decided to sell off their positions entirely last quarter. Interestingly, Charles Fitzgerald’s V3 Capital cut the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $29.9 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $17.9 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to MGM Growth Properties LLC (NYSE:MGP). These stocks are eXp World Holdings, Inc. (NASDAQ:EXPI), Owl Rock Capital Corporation (NYSE:ORCC), Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC), Houlihan Lokey Inc (NYSE:HLI), TIM S.A. (NYSE:TIMB), Graphic Packaging Holding Company (NYSE:GPK), and Workiva Inc (NYSE:WK). This group of stocks’ market valuations are closest to MGP’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.7 hedge funds with bullish positions and the average amount invested in these stocks was $259 million. That figure was $505 million in MGP’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (NYSE:PAC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks MGM Growth Properties LLC (NYSE:MGP) is more popular among hedge funds. Our overall hedge fund sentiment score for MGP is 75.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on MGP as the stock returned 11.8% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.