Here is What Hedge Funds Think About Melco Crown Entertainment Ltd (ADR) (MPEL)

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) .

Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 16 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare MPEL to other stocks including BancorpSouth, Inc. (NYSE:BXS), SunPower Corporation (NASDAQ:SPWR), and Knight Transportation (NYSE:KNX) 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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What have hedge funds been doing with Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter of 2016. By comparison, 13 hedge funds held shares or bullish call options in MPEL heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Lei Zhang’s Hillhouse Capital Management has the largest position in Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), worth close to $125.3 million, accounting for 2.6% of its total 13F portfolio. Coming in second is Southeastern Asset Management, led by Mason Hawkins, holding a $119.6 million position; 1.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions comprise Brett Barakett’s Tremblant Capital, Hari Hariharan’s NWI Management and Brett Barakett’s Tremblant Capital. We should note that Southeastern Asset Management is 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.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dropped their entire stakes in the stock during the third quarter. Interestingly, Matt Sirovich and Jeremy Mindich’s Scopia Capital dropped the biggest investment of the 700 funds followed by Insider Monkey, comprising about $44.4 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $8.8 million worth.

Let’s check out hedge fund activity in other stocks similar to Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL). We will take a look at BancorpSouth, Inc. (NYSE:BXS), SunPower Corporation (NASDAQ:SPWR), Knight Transportation (NYSE:KNX), and Impax Laboratories Inc (NASDAQ:IPXL). This group of stocks’ market valuations are similar to MPEL’s market valuation.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $371 million in MPEL’s case. SunPower Corporation (NASDAQ:SPWR) is the most popular stock in this table. On the other hand Knight Transportation (NYSE:KNX) is the least popular one with only 9 bullish hedge fund positions. Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) 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 SPWR might be a better candidate to consider taking a long position in.

Disclosure: None