Was The Smart Money Right About MGM Resorts International (MGM)?

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of MGM Resorts International (NYSE:MGM) based on that data.

MGM Resorts International (NYSE:MGM) has experienced an increase in enthusiasm from smart money lately. MGM Resorts International (NYSE:MGM) was in 59 hedge funds’ portfolios at the end of June. 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 Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

William Gray of Orbis Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the recent hedge fund action encompassing MGM Resorts International (NYSE:MGM).

Do Hedge Funds Think MGM Is A Good Stock To Buy Now?

At the end of June, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MGM over the last 24 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in MGM Resorts International (NYSE:MGM) was held by Corvex Capital, which reported holding $668.5 million worth of stock at the end of June. It was followed by Orbis Investment Management with a $504.6 million position. Other investors bullish on the company included SRS Investment Management, Southeastern Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Corvex Capital allocated the biggest weight to MGM Resorts International (NYSE:MGM), around 22.36% of its 13F portfolio. SRS Investment Management is also relatively very bullish on the stock, designating 7.19 percent of its 13F equity portfolio to MGM.

Now, key hedge funds have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, assembled the largest call position in MGM Resorts International (NYSE:MGM). Citadel Investment Group had $82.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $15.3 million position during the quarter. The following funds were also among the new MGM investors: Eduardo Abush’s Waterfront Capital Partners, Joseph Samuels’s Islet Management, and George Soros’s Soros Fund Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as MGM Resorts International (NYSE:MGM) but similarly valued. We will take a look at Church & Dwight Co., Inc. (NYSE:CHD), Gartner Inc (NYSE:IT), Fortis Inc. (NYSE:FTS), StoneCo Ltd. (NASDAQ:STNE), Avantor, Inc. (NYSE:AVTR), Halliburton Company (NYSE:HAL), and Take-Two Interactive Software, Inc. (NASDAQ:TTWO). This group of stocks’ market caps match MGM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1589 million. That figure was $2889 million in MGM’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 9 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 83.4. 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 returned 26.3% in 2021 through October 29th but still managed to beat the market by 2.3 percentage points. Hedge funds were also right about betting on MGM as the stock returned 10.6% since the end of June (through 10/29) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.