A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of SeaWorld Entertainment Inc (NYSE:SEAS) during the quarter.
Is SeaWorld Entertainment Inc (NYSE:SEAS) worth your attention right now? Investors who are in the know are selling. The number of bullish hedge fund bets were cut by 3 in recent months. SEAS was in 30 hedge funds’ portfolios at the end of September. There were 33 hedge funds in our database with SEAS positions at the end of the previous quarter. 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 MSG Networks Inc (NYSE:MSGN), TESARO Inc (NASDAQ:TSRO), and Globalstar, Inc. (NYSEMKT:GSAT) to gather more data points.
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According to most investors, hedge funds are perceived as worthless, outdated financial tools of years past. While there are greater than 8000 funds trading today, We choose to focus on the leaders of this club, around 700 funds. These hedge fund managers handle most of the hedge fund industry’s total capital, and by observing their inimitable picks, Insider Monkey has unsheathed many investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, we’re going to review the new action regarding SeaWorld Entertainment Inc (NYSE:SEAS).
What does the smart money think about SeaWorld Entertainment Inc (NYSE:SEAS)?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 9% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Thomas E. Claugus’s GMT Capital has the biggest position in SeaWorld Entertainment Inc (NYSE:SEAS), worth close to $60.6 million, accounting for 1.5% of its total 13F portfolio. The second largest stake is held by Sheffield Asset Management, managed by Craig C. Albert, which holds a $35.4 million position; 5.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism encompass James Dondero’s Highland Capital Management, Stephen V. Raneri’s LionEye Capital Management and Julian Robertson’s Tiger Management.
Seeing as SeaWorld Entertainment Inc (NYSE:SEAS) has faced bearish sentiment from hedge fund managers, we can see that there were a few funds that slashed their entire stakes last quarter. At the top of the heap, Charles Clough’s Clough Capital Partners cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $24.5 million in stock. Jonathon Jacobson’s fund, Highfields Capital Management, also dumped its stock, about $16.5 million worth of shares. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SeaWorld Entertainment Inc (NYSE:SEAS) but similarly valued. These stocks are MSG Networks Inc (NYSE:MSGN), TESARO Inc (NASDAQ:TSRO), Globalstar, Inc. (NYSEMKT:GSAT), and Yamana Gold Inc. (USA) (NYSE:AUY). All of these stocks’ market caps resemble SEAS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MSGN | 20 | 325674 | 20 |
| TSRO | 17 | 228942 | -2 |
| GSAT | 16 | 174486 | -4 |
| AUY | 16 | 52574 | -1 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. MSG Networks Inc (NYSE:MSGN) is the most popular stock in this table. On the other hand Globalstar, Inc. (NYSEMKT:GSAT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks SeaWorld Entertainment Inc (NYSE:SEAS) is more popular among hedge funds and has attracted investments worth $303 million. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
