The shares of Wynn Resorts, Limited (NASDAQ:WYNN) have opened this week on a positive note, gaining as much as 5.95% in morning trading today and currently trading up by 4.43% on the day. The primary reason for this boost is the latest speculation that the Chinese government outlook over the smoking rooms on gaming floors in Macau may be easing. The shares of Wynn Macau Ltd., a subsidiary of Wynn Resorts, Limited (NASDAQ:WYNN), were up by 5.7% as of the reporting period. According to a government official, the government might allow casinos to run smoking rooms if they can scientifically prove the safety of their employees and patrons against the effects of tobacco smoke (one would assume however that this will be difficult, given the mounds of data to the contrary).
While discussing the regulations, Alexis Tam Chon Weng, the secretary of social affairs and culture, said, “Some legislators seem very confident about establishing smoking lounges that can scientifically and effectively prevent the health of gaming workers and tourists from being affected by tobacco.” This could be excellent news for casinos and game operators in Macau, as the city struggles to keep up its gaming revenue. The casino revenue in the region declined by 36.2% in June 2015 to $2.17 billion on a monthly basis and the revenues were down by 37.4% in the second quarter of 2015.
In addition to this announcement, the local authorities relaxed the tourist stay guidelines for Macau earlier this month, including allowing travelers with Chinese passports to stay in the city for seven days compared to the previous limit of five days. The shares of Wynn Resorts, Limited (NASDAQ:WYNN) are down by 27.19% year-to-date. However, smart money has a positive outlook on the company. Out of the 730 hedge funds that we track at Insider Monkey, 25 managers have invested $936.81 million in the gaming company against investments of $878.66 million three months earlier. The increase in the value of smart money’s holdings is even more notable when you consider that the stock lost 15.5% of its value during that time.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 135% and beating the market by more than 80 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
The insiders at Wynn Resorts, Limited have joined hands with the hedge fund managers in terms of boosting their investments in the company. Insiders are bullish, with John Hagenbuch, Director at Wynn Resorts, buying 5,850 shares of the company on May 6, 2015.
Positive hedge fund sentiment often indicates growth potential in upcoming months, so keeping this in mind we’re going to analyze the detailed hedge fund action surrounding Wynn Resorts, Limited (NASDAQ:WYNN).
Hedge fund activity in Wynn Resorts, Limited (NASDAQ:WYNN)
Heading into the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long in this stock, a reduction of 38% from the previous quarter. 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 significantly.
According to hedge fund intelligence website Insider Monkey, Mason Hawkins‘ Southeastern Asset Management had the largest position in Wynn Resorts, Limited (NASDAQ:WYNN), worth close to $575.75 million against 4.57 million shares, comprising 3.61% of its total 13F portfolio. The second-most bullish hedge fund manager was Millennium Management, led by Israel Englander, holding a $68.59 million position of call options underlying 544,893 shares; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedgies that hold long positions comprise Murray Stahl’s Horizon Asset Management, David E. Shaw’s D E Shaw, and Ken Griffin’s Citadel Investment Group.
Seeing as Wynn Resorts, Limited (NASDAQ:WYNN) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds that decided to sell off their entire stakes in the first quarter. Interestingly, Kevin D. Eng’s Columbus Hill Capital Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $89.3 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $70.4 million worth. These transactions are interesting, as total hedge fund interest fell by 15 funds in the first quarter.
Despite the lower year-to-date performance of the stock, we would recommend investors to look out for positive news favoring the stock and hold on to their current positions in the company.
Disclosure: None
