Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Melco Resorts & Entertainment Limited (NASDAQ:MLCO) in this article.
Is Melco Resorts & Entertainment Limited (NASDAQ:MLCO) a bargain? Money managers were taking a bearish view. The number of long hedge fund positions decreased by 1 lately. Melco Resorts & Entertainment Limited (NASDAQ:MLCO) was in 29 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that MLCO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To most shareholders, hedge funds are viewed as underperforming, old financial vehicles of the past. While there are over 8000 funds with their doors open today, We choose to focus on the moguls of this group, about 850 funds. These investment experts manage most of the hedge fund industry’s total capital, and by observing their finest equity investments, Insider Monkey has found a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
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Do Hedge Funds Think MLCO Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in MLCO 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.
The largest stake in Melco Resorts & Entertainment Limited (NASDAQ:MLCO) was held by Broad Peak Investment Holdings, which reported holding $123.9 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $80.3 million position. Other investors bullish on the company included Melvin Capital Management, King Street Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Brightlight Capital allocated the biggest weight to Melco Resorts & Entertainment Limited (NASDAQ:MLCO), around 11.11% of its 13F portfolio. Broad Peak Investment Holdings is also relatively very bullish on the stock, earmarking 7.27 percent of its 13F equity portfolio to MLCO.
Since Melco Resorts & Entertainment Limited (NASDAQ:MLCO) has experienced declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies that decided to sell off their positions entirely by the end of the first quarter. Intriguingly, Daniel Lascano’s Lomas Capital Management cut the largest position of all the hedgies watched by Insider Monkey, worth about $61.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $34.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks similar to Melco Resorts & Entertainment Limited (NASDAQ:MLCO). We will take a look at Upstart Holdings, Inc. (NASDAQ:UPST), Lamar Advertising Company (NASDAQ:LAMR), AECOM (NYSE:ACM), Continental Resources, Inc. (NYSE:CLR), NiSource Inc. (NYSE:NI), Kohl’s Corporation (NYSE:KSS), and Appian Corporation (NASDAQ:APPN). All of these stocks’ market caps are similar to MLCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UPST | 13 | 1798914 | -2 |
| LAMR | 35 | 427242 | -1 |
| ACM | 38 | 1005485 | 1 |
| CLR | 23 | 154016 | -6 |
| NI | 28 | 268051 | 5 |
| KSS | 35 | 1417821 | -5 |
| APPN | 24 | 914428 | 0 |
| Average | 28 | 855137 | -1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $855 million. That figure was $728 million in MLCO’s case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Upstart Holdings, Inc. (NASDAQ:UPST) is the least popular one with only 13 bullish hedge fund positions. Melco Resorts & Entertainment Limited (NASDAQ:MLCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MLCO is 60.9. 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. 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 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 gained 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately MLCO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MLCO were disappointed as the stock returned -15.5% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Melco Resorts & Entertainment Ltd (NASDAQ:MLCO)
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Disclosure: None. This article was originally published at Insider Monkey.
