Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards SeaWorld Entertainment Inc (NYSE:SEAS) to find out whether there were any major changes in hedge funds’ views.
Is SEAS a good stock to buy? SeaWorld Entertainment Inc (NYSE:SEAS) has seen a decrease in activity from the world’s largest hedge funds in recent months. SeaWorld Entertainment Inc (NYSE:SEAS) was in 38 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 41. There were 41 hedge funds in our database with SEAS positions at the end of the second quarter. Our calculations also showed that SEAS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to go over the recent hedge fund action surrounding SeaWorld Entertainment Inc (NYSE:SEAS).
Peter Algert of Algert Global
Do Hedge Funds Think SEAS Is A Good Stock To Buy Now?
At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in SEAS over the last 25 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Hill Path Capital was the largest shareholder of SeaWorld Entertainment Inc (NYSE:SEAS), with a stake worth $1505 million reported as of the end of September. Trailing Hill Path Capital was Melvin Capital Management, which amassed a stake valued at $190 million. Melvin Capital Management, Simcoe Capital Management, and Two Sigma Advisors 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 78.02% of its 13F portfolio. Simcoe Capital Management is also relatively very bullish on the stock, designating 8 percent of its 13F equity portfolio to SEAS.
Due to the fact that SeaWorld Entertainment Inc (NYSE:SEAS) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of funds that slashed their entire stakes by the end of the third quarter. It’s worth mentioning that Gregg Moskowitz’s Interval Partners cut the largest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $16.6 million in call options, and Brad Stephens’s Six Columns Capital was right behind this move, as the fund said goodbye to about $10 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SeaWorld Entertainment Inc (NYSE:SEAS) but similarly valued. These stocks are Envestnet Inc (NYSE:ENV), Option Care Health, Inc. (NASDAQ:OPCH), Tegna Inc (NYSE:TGNA), Coursera, Inc. (NYSE:COUR), American Eagle Outfitters Inc. (NYSE:AEO), Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX), and Fisker Inc. (NYSE:FSR). This group of stocks’ market valuations are closest to SEAS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENV | 12 | 357107 | -5 |
| OPCH | 30 | 361789 | -1 |
| TGNA | 37 | 420370 | 19 |
| COUR | 25 | 173727 | 14 |
| AEO | 24 | 1208509 | -17 |
| OCDX | 30 | 272834 | 9 |
| FSR | 15 | 228103 | -1 |
| Average | 24.7 | 431777 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.7 hedge funds with bullish positions and the average amount invested in these stocks was $432 million. That figure was $2209 million in SEAS’s case. Tegna Inc (NYSE:TGNA) is the most popular stock in this table. On the other hand Envestnet Inc (NYSE:ENV) is the least popular one with only 12 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 79.8. 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 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on SEAS as the stock returned 6.6% since the end of September (through 11/30) 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.
