Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards MGM Resorts International (NYSE:MGM) at the end of the third quarter and determine whether the smart money was really smart about this stock.
MGM Resorts International (NYSE:MGM) has seen a decrease in hedge fund sentiment in recent months. MGM Resorts International (NYSE:MGM) was in 50 hedge funds’ portfolios at the end of September. The all time high for this statistic is 67. Our calculations also showed that MGM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
William Gray of Orbis Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a gander at the fresh hedge fund action regarding MGM Resorts International (NYSE:MGM).
Do Hedge Funds Think MGM Is A Good Stock To Buy Now?
At Q3’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MGM over the last 25 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Corvex Capital was the largest shareholder of MGM Resorts International (NYSE:MGM), with a stake worth $676.3 million reported as of the end of September. Trailing Corvex Capital was SRS Investment Management, which amassed a stake valued at $490.9 million. Orbis Investment Management, Southeastern Asset Management, and Rima Senvest Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Corvex Capital allocated the biggest weight to MGM Resorts International (NYSE:MGM), around 20.93% of its 13F portfolio. SRS Investment Management is also relatively very bullish on the stock, dishing out 6.9 percent of its 13F equity portfolio to MGM.
Judging by the fact that MGM Resorts International (NYSE:MGM) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few funds that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Robert Pitts’s Steadfast Capital Management dropped the biggest stake of all the hedgies watched by Insider Monkey, worth close to $100.6 million in stock. Josh Donfeld and David Rogers’s fund, Castle Hook Partners, also sold off its stock, about $27.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 9 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to MGM Resorts International (NYSE:MGM). We will take a look at Trimble Inc. (NASDAQ:TRMB), KeyCorp (NYSE:KEY), Fresenius Medical Care AG & Co. (NYSE:FMS), Baker Hughes Company (NYSE:BKR), W.W. Grainger, Inc. (NYSE:GWW), Live Nation Entertainment, Inc. (NYSE:LYV), and Ingersoll Rand Inc. (NYSE:IR). This group of stocks’ market caps are similar to MGM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRMB | 34 | 1814792 | 7 |
| KEY | 36 | 399496 | -4 |
| FMS | 4 | 231694 | -1 |
| BKR | 37 | 1013933 | -3 |
| GWW | 28 | 306060 | -1 |
| LYV | 47 | 1308167 | 7 |
| IR | 33 | 732834 | 2 |
| Average | 31.3 | 829568 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $830 million. That figure was $2741 million in MGM’s case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks MGM Resorts International (NYSE:MGM) is more popular among hedge funds. Our overall hedge fund sentiment score for MGM is 68.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, MGM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MGM were disappointed as the stock returned -1% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
Follow Mgm Resorts International (NYSE:MGM)
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Disclosure: None. This article was originally published at Insider Monkey.
