Is SEAS Stock A Buy or Sell?

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 stock a buy? SeaWorld Entertainment Inc (NYSE:SEAS) was in 33 hedge funds’ portfolios at the end of December. The all time high for this statistic is 39. SEAS has experienced an increase in hedge fund interest recently. There were 32 hedge funds in our database with SEAS positions at the end of the third quarter. Our calculations also showed that SEAS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Siegel of Two Sigma Advisors

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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. With all of this in mind let’s review the fresh hedge fund action encompassing SeaWorld Entertainment Inc (NYSE:SEAS).

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

At the end of December, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. By comparison, 39 hedge funds held shares or bullish call options in SEAS a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Hill Path Capital held the most valuable stake in SeaWorld Entertainment Inc (NYSE:SEAS), which was worth $859.4 million at the end of the fourth quarter. On the second spot was Candlestick Capital Management which amassed $57.3 million worth of shares. Point72 Asset Management, Millennium Management, and Arrowstreet 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 Hill Path Capital allocated the biggest weight to SeaWorld Entertainment Inc (NYSE:SEAS), around 82.9% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, setting aside 6.24 percent of its 13F equity portfolio to SEAS.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Interval Partners, managed by Gregg Moskowitz, established the largest position in SeaWorld Entertainment Inc (NYSE:SEAS). Interval Partners had $22.1 million invested in the company at the end of the quarter. Elise Di Vincenzo Crumbine’s Stormborn Capital Management also made a $6.8 million investment in the stock during the quarter. The other funds with brand new SEAS positions are John Overdeck and David Siegel’s Two Sigma Advisors, Eduardo Abush’s Waterfront Capital Partners, and Kamyar Khajavi’s MIK Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as SeaWorld Entertainment Inc (NYSE:SEAS) but similarly valued. These stocks are BioTelemetry, Inc. (NASDAQ:BEAT), Cronos Group Inc. (NASDAQ:CRON), Commercial Metals Company (NYSE:CMC), United Community Banks Inc (NASDAQ:UCBI), Pulmonx Corporation (NASDAQ:LUNG), Pebblebrook Hotel Trust (NYSE:PEB), and Teradata Corporation (NYSE:TDC). This group of stocks’ market caps match SEAS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $168 million. That figure was $1214 million in SEAS’s case. BioTelemetry, Inc. (NASDAQ:BEAT) is the most popular stock in this table. On the other hand Cronos Group Inc. (NASDAQ:CRON) is the least popular one with only 11 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 81.4. 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 returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on SEAS as the stock returned 61.6% since the end of December (through 4/1) 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.

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