At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is SeaWorld Entertainment Inc (NYSE:SEAS) a buy, sell, or hold? Prominent investors are in a pessimistic mood. The number of long hedge fund bets was cut by 2 recently. 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 CYS Investments Inc (NYSE:CYS), Guess?, Inc. (NYSE:GES), and Petrobras Argentina SA ADR (NYSE:PZE) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about SeaWorld Entertainment Inc (NYSE:SEAS)?
Heading into the fourth quarter of 2016, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 13% drop from one quarter earlier and the fourth-straight quarter with a decline in hedge fund ownership of the struggling company. There were a total of 24 hedge funds with a bullish position in SEAS at the beginning of this year. 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, GMT Capital, led by Thomas E. Claugus, holds the largest position in SeaWorld Entertainment Inc (NYSE:SEAS). GMT Capital has a $44.5 million position in the stock. On GMT Capital’s heels is Jericho Capital Asset Management, led by Josh Resnick, holding a $20.6 million position. Some other members of the smart money that are bullish consist of Matthew Hulsizer’s PEAK6 Capital Management, Steven Boyd’s Armistice Capital, and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that SeaWorld Entertainment Inc (NYSE:SEAS) has experienced falling interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their full holdings heading into Q4. Interestingly, Malcolm Fairbairn’s Ascend Capital cashed in the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $5.4 million in stock. Ira Unschuld’s fund, Brant Point Investment Management, also dumped its call options, about $1.5 million worth.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SeaWorld Entertainment Inc (NYSE:SEAS) but similarly valued. We will take a look at CYS Investments Inc (NYSE:CYS), Guess?, Inc. (NYSE:GES), Petrobras Argentina SA ADR (NYSE:PZE), and Alliance Holdings GP, L.P. (NASDAQ:AHGP). This group of stocks’ market valuations match SEAS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYS | 12 | 34791 | 4 |
| GES | 15 | 62779 | 4 |
| PZE | 8 | 10710 | -1 |
| AHGP | 4 | 13161 | -3 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $106 million in SEAS’s case. Guess?, Inc. (NYSE:GES) is the most popular stock in this table. On the other hand Alliance Holdings GP, L.P. (NASDAQ:AHGP) is the least popular one with only 4 bullish hedge fund positions. SeaWorld Entertainment Inc (NYSE:SEAS) 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 recently. In this regard GES might be a better candidate to consider taking a long position in.
Disclosure: None
