Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of SeaWorld Entertainment Inc (NYSE:SEAS) based on that data and determine whether they were really smart about the stock.
SeaWorld Entertainment Inc (NYSE:SEAS) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds’ portfolios at the end of June. Our calculations also showed that SEAS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hercules Capital Inc (NYSE:HTGC), Colony Capital Inc (NYSE:CLNY), and Sleep Number Corporation (NASDAQ:SNBR) to gather more data points. Our calculations also showed that SEAS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Parag Vora of HG Vora Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s check out the new hedge fund action encompassing SeaWorld Entertainment Inc (NYSE:SEAS).
What does smart money think about SeaWorld Entertainment Inc (NYSE:SEAS)?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in SEAS a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes 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 $402.9 million reported as of the end of September. Trailing Hill Path Capital was HG Vora Capital Management, which amassed a stake valued at $85.2 million. Candlestick Capital Management, Long Pond Capital, and Renaissance Technologies 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 93.36% of its 13F portfolio. HG Vora Capital Management is also relatively very bullish on the stock, designating 7.66 percent of its 13F equity portfolio to SEAS.
Since SeaWorld Entertainment Inc (NYSE:SEAS) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few hedgies that slashed their entire stakes last quarter. Interestingly, Jeffrey Jacobowitz’s Simcoe Capital Management dumped the biggest investment of all the hedgies followed by Insider Monkey, comprising an estimated $13.1 million in stock. Noah Levy and Eugene Dozortsev’s fund, Newtyn Management, also sold off its stock, about $3.9 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to SeaWorld Entertainment Inc (NYSE:SEAS). We will take a look at Hercules Capital Inc (NYSE:HTGC), Colony Capital Inc (NYSE:CLNY), Sleep Number Corporation (NASDAQ:SNBR), MicroStrategy Incorporated (NASDAQ:MSTR), Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT), Kaman Corporation (NYSE:KAMN), and Aphria Inc. (NASDAQ:APHA). This group of stocks’ market values are closest to SEAS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTGC | 15 | 63806 | -1 |
| CLNY | 16 | 83813 | -2 |
| SNBR | 19 | 116071 | -1 |
| MSTR | 26 | 75128 | 8 |
| ARQT | 10 | 552407 | 2 |
| KAMN | 13 | 145485 | 0 |
| APHA | 9 | 10643 | 0 |
| Average | 15.4 | 149622 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $677 million in SEAS’s case. MicroStrategy Incorporated (NASDAQ:MSTR) is the most popular stock in this table. On the other hand Aphria Inc. (NASDAQ:APHA) is the least popular one with only 9 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 75.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 21.3% in 2020 through September 25th but still managed to beat the market by 17.7 percentage points. Hedge funds were also right about betting on SEAS as the stock returned 38.4% since the end of June 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.
