Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards SeaWorld Entertainment Inc (NYSE:SEAS).
Is SEAS a good stock to buy? Hedge funds were turning bullish. The number of long hedge fund bets moved up by 5 lately. SeaWorld Entertainment Inc (NYSE:SEAS) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 39. Our calculations also showed that SEAS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 27 hedge funds in our database with SEAS holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are dozens of signals stock traders use to evaluate their holdings. A pair of the best signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can outpace the broader indices by a significant amount (see the details here).
Robert Pohly of Samlyn Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s analyze the fresh hedge fund action regarding SeaWorld Entertainment Inc (NYSE:SEAS).
Do Hedge Funds Think SEAS Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in SEAS a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in SeaWorld Entertainment Inc (NYSE:SEAS) was held by Hill Path Capital, which reported holding $536.5 million worth of stock at the end of September. It was followed by Candlestick Capital Management with a $59.6 million position. Other investors bullish on the company included Point72 Asset Management, Candlestick Capital Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Hill Path Capital allocated the biggest weight to SeaWorld Entertainment Inc (NYSE:SEAS), around 88.45% of its 13F portfolio. White Square Capital is also relatively very bullish on the stock, designating 11.57 percent of its 13F equity portfolio to SEAS.
As one would reasonably expect, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in SeaWorld Entertainment Inc (NYSE:SEAS). Point72 Asset Management had $38.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $21 million position during the quarter. The other funds with brand new SEAS positions are Robert Pohly’s Samlyn Capital, Anthony Joseph Vaccarino’s North Fourth Asset Management, and Sander Gerber’s Hudson Bay Capital Management.
Let’s check out hedge fund activity in other stocks similar to SeaWorld Entertainment Inc (NYSE:SEAS). We will take a look at Mueller Industries, Inc. (NYSE:MLI), Viela Bio, Inc. (NASDAQ:VIE), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), Sapiens International Corporation N.V. (NASDAQ:SPNS), MAG Silver Corporation (NYSE:MAG), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), and CorVel Corporation (NASDAQ:CRVL). This group of stocks’ market caps are similar to SEAS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MLI | 20 | 185077 | 2 |
| VIE | 5 | 145172 | -3 |
| YMAB | 10 | 113072 | -3 |
| SPNS | 11 | 50259 | 5 |
| MAG | 10 | 228135 | 0 |
| LGND | 22 | 258838 | 0 |
| CRVL | 12 | 120490 | -3 |
| Average | 12.9 | 157292 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $797 million in SEAS’s case. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is the most popular stock in this table. On the other hand Viela Bio, Inc. (NASDAQ:VIE) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks SeaWorld Entertainment Inc (NYSE:SEAS) is more popular among hedge funds. Our overall hedge fund sentiment score for SEAS is 84.6. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on SEAS as the stock returned 57.9% since the end of September (through 12/18) 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.
