Hedge Funds Don’t Know What to Make of Caesars Entertainment Corp (CZR)

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.

Caesars Entertainment Corp (NASDAQ:CZR) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare CZR to other stocks including Golar LNG Partners LP (NASDAQ:GMLP), DeVry Inc. (NYSE:DV), and TowneBank (NASDAQ:TOWN) to get a better sense of its popularity.

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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How have hedgies been trading Caesars Entertainment Corp (NASDAQ:CZR)?

Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the second quarter of 2016. After a steep dip in ownership in Q4 2015, it’s remained relatively flat since. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Paulson’s Paulson & Co has the largest position in Caesars Entertainment Corp (NASDAQ:CZR), worth close to $107.4 million, accounting for 1.2% of its total 13F portfolio. Coming in second is Mason Capital Management, led by Kenneth Mario Garschina, holding a $53.6 million position; the fund has 4.6% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of Doug Silverman and Alexander Klabin’s Senator Investment Group, George Soros’ Soros Fund Management and Matthew Knauer and Mina Faltas’ Nokota Management.

Seeing as Caesars Entertainment Corp (NASDAQ:CZR) has witnessed flat sentiment from hedge fund managers, it’s safe to say that there was a specific group of money managers that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Frank Brosens’ Taconic Capital said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $0.7 million in stock, and Paul Tudor Jones’ Tudor Investment Corp was right behind this move, as the fund said goodbye to about $0.2 million worth of shares. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Caesars Entertainment Corp (NASDAQ:CZR). These stocks are Golar LNG Partners LP (NASDAQ:GMLP), DeVry Inc. (NYSE:DV), TowneBank (NASDAQ:TOWN), and Clearwater Paper Corp (NYSE:CLW). This group of stocks’ market caps resemble CZR’s market cap.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $328 million in CZR’s case. DeVry Inc. (NYSE:DV) is the most popular stock in this table. On the other hand Golar LNG Partners LP (NASDAQ:GMLP) is the least popular one with only 8 bullish hedge fund positions. Caesars Entertainment Corp (NASDAQ:CZR) 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 DV might be a better candidate to consider a long position in.

Disclosure: None