Is MGM Stock A Buy or Sell?

Is MGM Resorts International (NYSE:MGM) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is MGM stock a buy or sell? MGM Resorts International (NYSE:MGM) was in 44 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 67. MGM investors should pay attention to an increase in hedge fund sentiment recently. There were 41 hedge funds in our database with MGM holdings at the end of September. Our calculations also showed that MGM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Keith Meister of Corvex Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). Keeping this in mind we’re going to take a look at the recent hedge fund action regarding MGM Resorts International (NYSE:MGM).

Do Hedge Funds Think MGM Is A Good Stock To Buy Now?

At Q4’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. By comparison, 50 hedge funds held shares or bullish call options in MGM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Corvex Capital held the most valuable stake in MGM Resorts International (NYSE:MGM), which was worth $710.2 million at the end of the fourth quarter. On the second spot was Orbis Investment Management which amassed $448.7 million worth of shares. Southeastern Asset Management, Steadfast Capital Management, and Maverick Capital 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 Corvex Capital allocated the biggest weight to MGM Resorts International (NYSE:MGM), around 25.35% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, earmarking 4.96 percent of its 13F equity portfolio to MGM.

Consequently, specific money managers have been driving this bullishness. Steadfast Capital Management, managed by Robert Pitts, initiated the largest position in MGM Resorts International (NYSE:MGM). Steadfast Capital Management had $177.9 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $158.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Chris Rokos’s Rokos Capital Management, Steve Cohen’s Point72 Asset Management, and Parvinder Thiara’s Athanor Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MGM Resorts International (NYSE:MGM) but similarly valued. These stocks are Darden Restaurants, Inc. (NYSE:DRI), Regions Financial Corporation (NYSE:RF), Essex Property Trust Inc (NYSE:ESS), Caesars Entertainment Inc. (NASDAQ:CZR), CarMax Inc (NYSE:KMX), Shinhan Financial Group Co., Ltd. (NYSE:SHG), and Waters Corporation (NYSE:WAT). This group of stocks’ market values match MGM’s market value.

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As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $981 million. That figure was $2171 million in MGM’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 bullish hedge fund positions. MGM Resorts International (NYSE:MGM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGM is 56.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on MGM as the stock returned 27% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.