The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards MGM Resorts International (NYSE:MGM).
MGM Resorts International (NYSE:MGM) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. MGM Resorts International (NYSE:MGM) was in 44 hedge funds’ portfolios at the end of December. The all time high for this statistic is 67. There were 41 hedge funds in our database with MGM positions at the end of the third quarter. Our calculations also showed that MGM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Lee Ainslie of Maverick Capital
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Do Hedge Funds Think MGM Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MGM over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in MGM Resorts International (NYSE:MGM) was held by Corvex Capital, which reported holding $710.2 million worth of stock at the end of December. It was followed by Orbis Investment Management with a $448.7 million position. Other investors bullish on the company included Southeastern Asset Management, Steadfast Capital Management, and Maverick Capital. In terms of the portfolio weights assigned to each position Corvex Capital allocated the biggest weight to MGM Resorts International (NYSE:MGM), around 25.35% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, dishing out 4.96 percent of its 13F equity portfolio to MGM.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Steadfast Capital Management, managed by Robert Pitts, initiated the biggest position in MGM Resorts International (NYSE:MGM). Steadfast Capital Management had $177.9 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $158.1 million investment in the stock during the quarter. The other funds with brand new MGM positions are Chris Rokos’s Rokos Capital Management, Steve Cohen’s Point72 Asset Management, and Parvinder Thiara’s Athanor Capital.
Let’s now review hedge fund activity in other stocks similar to MGM Resorts International (NYSE:MGM). We will take a look at Darden Restaurants, Inc. (NYSE:DRI), Regions Financial Corporation (NYSE:RF), Essex Property Trust Inc (NYSE:ESS), Caesars Entertainment Inc. (NASDAQ:CZR), CarMax Inc (NYSE:KMX), Shinhan Financial Group Co., Ltd. (NYSE:SHG), and Waters Corporation (NYSE:WAT). This group of stocks’ market valuations are closest to MGM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRI | 42 | 1410846 | 1 |
| RF | 26 | 203027 | 3 |
| ESS | 25 | 309571 | -3 |
| CZR | 71 | 1438605 | -3 |
| KMX | 46 | 1485714 | -8 |
| SHG | 7 | 27734 | 3 |
| WAT | 30 | 1993478 | -2 |
| Average | 35.3 | 981282 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $981 million. That figure was $2171 million in MGM’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 bullish hedge fund positions. MGM Resorts International (NYSE:MGM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGM is 56.6. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on MGM as the stock returned 29.2% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
