Should You Sell MGM Resorts International (MGM)?

Is MGM Resorts International (NYSE:MGM) a sell?

If you were to ask many investors, hedge funds are perceived as useless, outdated financial vehicles of a forgotten age. Although there are over 8,000 hedge funds with their doors open today, Insider Monkey focuses on the leaders of this club, close to 525 funds. Analysts calculate that this group oversees the lion’s share of the smart money’s total assets, and by keeping an eye on their highest quality investments, we’ve spotted a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as useful, bullish insider trading activity is another way to analyze the stock market universe. There are plenty of incentives for an executive to downsize shares of his or her company, but only one, very simple reason why they would buy. Various academic studies have demonstrated the impressive potential of this tactic if piggybackers understand what to do (learn more here).

Thus, it’s important to discuss the latest info surrounding MGM Resorts International (NYSE:MGM).

How are hedge funds trading MGM Resorts International (NYSE:MGM)?

At the end of the second quarter, a total of 37 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes substantially.

According to our 13F database, Paulson & Co, managed by John Paulson, holds the biggest position in MGM Resorts International (NYSE:MGM). Paulson & Co has a $502.5 million position in the stock, comprising 3.5% of its 13F portfolio. Sitting at the No. 2 spot is Appaloosa Management LP, managed by David Tepper, which held a $99.2 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining hedgies with similar optimism include Paul Reeder and Edward Shapiro’s PAR Capital Management, Jeffrey Gates’s Gates Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Judging by the fact that MGM Resorts International (NYSE:MGM) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that slashed their entire stakes last quarter. At the top of the heap, Brian J. Higgins’s King Street Capital dropped the biggest investment of the “upper crust” of funds we key on, valued at an estimated $52.6 million in stock. Bruce J. Richards and Louis Hanover’s fund, Marathon Asset Management, also dropped its stock, about $31.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Insider trading activity in MGM Resorts International (NYSE:MGM)

Bullish insider trading is best served when the company in question has seen transactions within the past six months. Over the last six-month time period, MGM Resorts International (NYSE:MGM) has experienced zero unique insiders buying, and 5 insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to MGM Resorts International (NYSE:MGM). These stocks are Vail Resorts, Inc. (NYSE:MTN), Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), Wynn Resorts, Limited (NASDAQ:WYNN), Penn National Gaming, Inc (NASDAQ:PENN), and Royal Caribbean Cruises Ltd. (NYSE:RCL). All of these stocks are in the resorts & casinos industry and their market caps are similar to MGM’s market cap.

Using the results demonstrated by the previously mentioned analyses, regular investors must always pay attention to hedge fund and insider trading sentiment, and MGM Resorts International (NYSE:MGM) shareholders fit into this picture quite nicely.

Discover how hedge fund piggybacking can benefit you