Hedge Funds Are Selling Wynn Resorts, Limited (WYNN)

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Wynn Resorts, Limited (NASDAQ:WYNN).

Wynn Resorts, Limited (NASDAQ:WYNN) investors should pay attention to a slight decrease in enthusiasm from smart money in recent months. WYNN was in 34 hedge funds’ portfolios at the end of the third quarter of 2015. There were 35 hedge funds in our database with WYNN holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hudson City Bancorp, Inc. (NASDAQ:HCBK), Targa Resources Partners LP (NYSE:NGLS), and Newfield Exploration Co. (NYSE:NFX) to gather more data points.

In the 21st century investor’s toolkit there are a large number of metrics market participants put to use to analyze their holdings. A couple of the most under-the-radar metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top fund managers can trounce the broader indices by a very impressive margin (see the details here).

Keeping this in mind, let’s analyze the fresh action surrounding Wynn Resorts, Limited (NASDAQ:WYNN).

What does the smart money think about Wynn Resorts, Limited (NASDAQ:WYNN)?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Southeastern Asset Management, managed by Mason Hawkins, holds the largest position in Wynn Resorts, Limited (NASDAQ:WYNN). Southeastern Asset Management has an $644.5 million position in the stock, comprising 5.4% of its 13F portfolio. Sitting at the No. 2 spot is Eminence Capital, led by Ricky Sandler, holding an $75.1 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise D. E. Shaw’s D E Shaw, Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel Investment Group.

Judging by the fact that Wynn Resorts, Limited (NASDAQ:WYNN) has experienced a bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedgies that elected to cut their positions entirely last quarter. Interestingly, John Griffin’s Blue Ridge Capital sold off the largest investment of the 700 funds monitored by Insider Monkey, valued at an estimated $77.9 million in stock, and Malcolm Fairbairn’s Ascend Capital was right behind this move, as the fund said goodbye to about $47.3 million worth. These moves are interesting, as total hedge fund interest dropped by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Wynn Resorts, Limited (NASDAQ:WYNN). We will take a look at Hudson City Bancorp, Inc. (NASDAQ:HCBK), Targa Resources Partners LP (NYSE:NGLS), Newfield Exploration Co. (NYSE:NFX), and Enable Midstream Partners LP (NYSE:ENBL). This group of stocks’ market caps match WYNN’s market cap.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $395 million. That figure was $1.07 billion in WYNN’s case. Newfield Exploration Co. (NYSE:NFX) is the most popular stock in this table, while Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 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. In this regard NFX might be a better candidate to consider a long position.