Is Red Rock Resorts, Inc. (RRR) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Red Rock Resorts, Inc. (NASDAQ:RRR) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is RRR a good stock to buy? The best stock pickers were selling. The number of bullish hedge fund positions dropped by 2 lately. Red Rock Resorts, Inc. (NASDAQ:RRR) was in 26 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 30. Our calculations also showed that RRR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 28 hedge funds in our database with RRR positions at the end of the first quarter.

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ricky Sandler of Eminence Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla 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. With all of this in mind let’s take a peek at the fresh hedge fund action regarding Red Rock Resorts, Inc. (NASDAQ:RRR).

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

At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RRR over the last 24 quarters. So, let’s check 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, Eminence Capital, managed by Ricky Sandler, holds the largest position in Red Rock Resorts, Inc. (NASDAQ:RRR). Eminence Capital has a $210 million position in the stock, comprising 2.6% of its 13F portfolio. The second largest stake is held by Ric Dillon of Diamond Hill Capital, with a $209.4 million position; 0.8% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Reeder and Edward Shapiro’s PAR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Eminence Capital allocated the biggest weight to Red Rock Resorts, Inc. (NASDAQ:RRR), around 2.58% of its 13F portfolio. Thames Capital Management is also relatively very bullish on the stock, earmarking 1.99 percent of its 13F equity portfolio to RRR.

Since Red Rock Resorts, Inc. (NASDAQ:RRR) has witnessed falling interest from hedge fund managers, we can see that there exists a select few hedge funds that slashed their positions entirely by the end of the second quarter. At the top of the heap, Frank Fu’s CaaS Capital dumped the biggest position of the 750 funds tracked by Insider Monkey, comprising an estimated $7 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also cut its stock, about $3.6 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Red Rock Resorts, Inc. (NASDAQ:RRR) but similarly valued. We will take a look at Atotech Limited (NYSE:ATC), VIZIO Holding Corp. (NYSE:VZIO), Antero Midstream Corp (NYSE:AM), Neogen Corporation (NASDAQ:NEOG), New Residential Investment Corp (NYSE:NRZ), IDACORP Inc (NYSE:IDA), and Colliers International Group Inc (NASDAQ:CIGI). All of these stocks’ market caps are similar to RRR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $658 million in RRR’s case. Atotech Limited (NYSE:ATC) is the most popular stock in this table. On the other hand Neogen Corporation (NASDAQ:NEOG) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Red Rock Resorts, Inc. (NASDAQ:RRR) is more popular among hedge funds. Our overall hedge fund sentiment score for RRR is 79. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on RRR as the stock returned 34.6% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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