Is Studio City International Holdings Limited (MSC) Going to Burn These Hedge Funds?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Studio City International Holdings Limited (NYSE:MSC) based on those filings.

Studio City International Holdings Limited (NYSE:MSC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that MSC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 DermTech, Inc. (NASDAQ:DMTK), Meta Financial Group Inc. (NASDAQ:CASH), and G-III Apparel Group, Ltd. (NASDAQ:GIII) to gather more data points.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Israel Englander of Millennium Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Now let’s take a peek at the new hedge fund action surrounding Studio City International Holdings Limited (NYSE:MSC).

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

At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MSC over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Among these funds, Silver Point Capital held the most valuable stake in Studio City International Holdings Limited (NYSE:MSC), which was worth $203.1 million at the end of the fourth quarter. On the second spot was Redwood Capital Management which amassed $22.9 million worth of shares. Millennium Management was 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 Silver Point Capital allocated the biggest weight to Studio City International Holdings Limited (NYSE:MSC), around 21.41% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, earmarking 1.12 percent of its 13F equity portfolio to MSC.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s also examine hedge fund activity in other stocks similar to Studio City International Holdings Limited (NYSE:MSC). We will take a look at DermTech, Inc. (NASDAQ:DMTK), Meta Financial Group Inc. (NASDAQ:CASH), G-III Apparel Group, Ltd. (NASDAQ:GIII), Zymeworks Inc. (NYSE:ZYME), Star Bulk Carriers Corp. (NASDAQ:SBLK), Arco Platform Limited (NASDAQ:ARCE), and Archrock, Inc. (NYSE:AROC). All of these stocks’ market caps match MSC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $252 million. That figure was $227 million in MSC’s case. Zymeworks Inc. (NYSE:ZYME) is the most popular stock in this table. On the other hand Arco Platform Limited (NASDAQ:ARCE) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Studio City International Holdings Limited (NYSE:MSC) is even less popular than ARCE. Our overall hedge fund sentiment score for MSC is 23. 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. Hedge funds dodged a bullet by taking a bearish stance towards MSC. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th but managed to beat the market again by 3.3 percentage points. Unfortunately MSC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); MSC investors were disappointed as the stock returned -11.4% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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