Were Hedge Funds Right About Selling Caesars Entertainment Inc. (CZR)?

In this article we will analyze whether Caesars Entertainment Inc. (NASDAQ:CZR) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Caesars Entertainment Inc. (NASDAQ:CZR) a buy right now? Prominent investors were turning less bullish. The number of long hedge fund bets dropped by 3 lately. Caesars Entertainment Inc. (NASDAQ:CZR) was in 71 hedge funds’ portfolios at the end of December. The all time high for this statistic is 74. Our calculations also showed that CZR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 74 hedge funds in our database with CZR holdings at the end of September.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Joshua Friedman of Canyon Capital Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind let’s analyze the fresh hedge fund action encompassing Caesars Entertainment Inc. (NASDAQ:CZR).

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

At Q4’s end, a total of 71 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CZR over the last 22 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, holds the biggest position in Caesars Entertainment Inc. (NASDAQ:CZR). Canyon Capital Advisors has a $225.1 million position in the stock, comprising 9.7% of its 13F portfolio. On Canyon Capital Advisors’s heels is Jericho Capital Asset Management, managed by Josh Resnick, which holds a $91.7 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Robert Pohly’s Samlyn Capital, Roberto Mignone’s Bridger Management and Glen Kacher’s Light Street Capital. In terms of the portfolio weights assigned to each position Lafitte Capital Management allocated the biggest weight to Caesars Entertainment Inc. (NASDAQ:CZR), around 35.58% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, dishing out 13.59 percent of its 13F equity portfolio to CZR.

Judging by the fact that Caesars Entertainment Inc. (NASDAQ:CZR) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of funds that decided to sell off their entire stakes heading into Q1. At the top of the heap, Dan Loeb’s Third Point cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $56.1 million in stock. Robert Emil Zoellner’s fund, Alpine Associates, also sold off its stock, about $43.5 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds heading into Q1.

Let’s now take a look at hedge fund activity in other stocks similar to Caesars Entertainment Inc. (NASDAQ:CZR). These stocks are CarMax Inc (NYSE:KMX), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Waters Corporation (NYSE:WAT), Hewlett Packard Enterprise Company (NYSE:HPE), Citizens Financial Group Inc (NYSE:CFG), 10x Genomics, Inc. (NASDAQ:TXG), and Celanese Corporation (NYSE:CE). This group of stocks’ market valuations match CZR’s market valuation.

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As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $1439 million in CZR’s case. CarMax Inc (NYSE:KMX) 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. Compared to these stocks Caesars Entertainment Inc. (NASDAQ:CZR) is more popular among hedge funds. Our overall hedge fund sentiment score for CZR is 80.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on CZR as the stock returned 19.5% since the end of December (through 4/19) 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.

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