We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Boyd Gaming Corporation (NYSE:BYD) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Boyd Gaming Corporation (NYSE:BYD) investors should be aware of an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that BYD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Paul Reeder of PAR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the latest hedge fund action surrounding Boyd Gaming Corporation (NYSE:BYD).
How have hedgies been trading Boyd Gaming Corporation (NYSE:BYD)?
Heading into the first quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 30 hedge funds with a bullish position in BYD 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.
More specifically, PAR Capital Management was the largest shareholder of Boyd Gaming Corporation (NYSE:BYD), with a stake worth $49.4 million reported as of the end of September. Trailing PAR Capital Management was GAMCO Investors, which amassed a stake valued at $47.7 million. Lomas Capital Management, Millennium Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lomas Capital Management allocated the biggest weight to Boyd Gaming Corporation (NYSE:BYD), around 2.87% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, designating 2.21 percent of its 13F equity portfolio to BYD.
Now, specific money managers have jumped into Boyd Gaming Corporation (NYSE:BYD) headfirst. D E Shaw, managed by D. E. Shaw, created the largest position in Boyd Gaming Corporation (NYSE:BYD). D E Shaw had $8.6 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $1.3 million position during the quarter. The following funds were also among the new BYD investors: Paul Tudor Jones’s Tudor Investment Corp, Ray Dalio’s Bridgewater Associates, and Peter Muller’s PDT Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Boyd Gaming Corporation (NYSE:BYD) but similarly valued. We will take a look at Itron, Inc. (NASDAQ:ITRI), Sinopec Shanghai Petrochemical Co. (NYSE:SHI), Federated Investors Inc (NYSE:FII), and Corporate Office Properties Trust (NYSE:OFC). All of these stocks’ market caps match BYD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ITRI | 21 | 456240 | -4 |
| SHI | 3 | 14883 | -1 |
| FII | 29 | 236110 | 2 |
| OFC | 21 | 165223 | 3 |
| Average | 18.5 | 218114 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $216 million in BYD’s case. Federated Investors Inc (NYSE:FII) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Boyd Gaming Corporation (NYSE:BYD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately BYD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BYD were disappointed as the stock returned -48.6% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
