Should You Avoid Six Flags Entertainment Corp (SIX)?

The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Six Flags Entertainment Corp (NYSE:SIX) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Six Flags Entertainment Corp (NYSE:SIX) investors should be aware of a decrease in enthusiasm from smart money lately. At the end of this article we will also compare SIX to other stocks, including Home Properties, Inc. (NYSE:HME), Hexcel Corporation (NYSE:HXL), and First Solar, Inc. (NASDAQ:FSLR) to get a better sense of its popularity.

To the average investor, there are many metrics that market participants put to use to size up their holdings. Two of the less utilized metrics are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outperform the broader indices by a healthy margin (see the details here).

Keeping this in mind, we’re going to review the new action encompassing Six Flags Entertainment Corp (NYSE:SIX).

How have hedgies been trading Six Flags Entertainment Corp (NYSE:SIX)?

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 12% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, H Partners Management, managed by Rehan Jaffer, holds the most valuable position in Six Flags Entertainment Corp (NYSE:SIX). According to its latest quarterly report, the fund has a $751.7 million position in the stock, comprising 56.3% of its 13F portfolio. Sitting at the No. 2 spot is Falcon Edge Capital, managed by Richard Gerson and Navroz D. Udwadia, which holds a $56.9 million position; 3.9% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish include Amy Minella’s Cardinal Capital, Steve Cohen’s Point72 Asset Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Because Six Flags Entertainment Corp (NYSE:SIX) has experienced falling interest from hedge fund managers, it’s easy to see that there is a sect of funds that slashed their entire stakes last quarter. It’s worth mentioning that Greg Poole’s Echo Street Capital Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $16.9 million in stock. Mark Broach’s fund, Manatuck Hill Partners, also cut its investment, about $9.7 million worth of shares. These transactions are interesting, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Six Flags Entertainment Corp (NYSE:SIX). We will take a look at Home Properties, Inc. (NYSE:HME), Hexcel Corporation (NYSE:HXL), First Solar, Inc. (NASDAQ:FSLR), and Brocade Communications Systems, Inc. (NASDAQ:BRCD). All of these stocks’ market caps are similar to SIX’s market cap.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $403 million. The amount invested by hedge funds in SIX significantly exceeds the average: $1.05 billion. First Solar, Inc. (NASDAQ:FSLR) is the most popular stock in this table. On the other hand Hexcel Corporation (NYSE:HXL) is the least popular one with only 19 bullish hedge fund positions. Six Flags Entertainment Corp (NYSE:SIX) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FSLR might be a better candidate to consider a long position.