Should You Avoid Boyd Gaming Corporation (BYD)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Boyd Gaming Corporation (NYSE:BYD).

Is Boyd Gaming Corporation (NYSE:BYD) going to take off soon? Hedge funds are taking a pessimistic view. The number of bullish hedge fund positions went down by 4 lately. BYD was in 23 hedge funds’ portfolios at the end of the third quarter of 2016. There were 27 hedge funds in our database with BYD positions at the end of the previous quarter. At the end of this article we will also compare BYD to other stocks including Artisan Partners Asset Management Inc (NYSE:APAM), Verint Systems Inc. (NASDAQ:VRNT), and Bloomin’ Brands Inc (NASDAQ:BLMN) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

magicinfoto / Shutterstock.com

How have hedgies been trading Boyd Gaming Corporation (NYSE:BYD)?

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 15% drop from the second quarter of 2016 as hedge fund ownership fell for the third-straight quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management has the largest position in Boyd Gaming Corporation (NYSE:BYD), worth close to $158.4 million, comprising 2.3% of its total 13F portfolio. The second largest stake is held by Rehan Jaffer of H Partners Management, with a $108.8 million position; 8.8% of its 13F portfolio is allocated to the company. Remaining peers that are bullish contain Jacob Doft’s Highline Capital Management, John Khoury’s Long Pond Capital and Mario Gabelli’s GAMCO Investors.

Due to the fact that Boyd Gaming Corporation (NYSE:BYD) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies that slashed their full holdings by the end of the third quarter. At the top of the heap, Ira Unschuld’s Brant Point Investment Management dumped the largest investment of the 700 funds monitored by Insider Monkey, totaling an estimated $4.6 million in stock, and Robert B. Gillam’s McKinley Capital Management was right behind this move, as the fund dropped about $3.8 million worth of shares. These transactions are interesting, as total hedge fund interest dropped by 4 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Boyd Gaming Corporation (NYSE:BYD) but similarly valued. These stocks are Artisan Partners Asset Management Inc (NYSE:APAM), Verint Systems Inc. (NASDAQ:VRNT), Bloomin’ Brands Inc (NASDAQ:BLMN), and Pegasystems Inc. (NASDAQ:PEGA). All of these stocks’ market caps match BYD’s market cap.

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 $179 million. That figure was $668 million in BYD’s case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand Artisan Partners Asset Management Inc (NYSE:APAM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Boyd Gaming Corporation (NYSE:BYD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and have a lot of money invested in it, it may be a good idea to analyze it in detail and potentially include it in your portfolio, despite the recent declines in sentiment.

Disclosure: None