Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) has a booming presence in Macau, China, and this might be the No. 1 factor behind any optimist’s bullish thesis. So what are hedge funds doing here?
Now, according to many investors, hedge funds are assumed to be bloated, outdated financial vehicles of a forgotten age. Although there are over 8,000 hedge funds trading today, Insider Monkey focuses on the crème de la crème of this club, close to 525 funds. It is widely held that this group controls most of the hedge fund industry’s total capital, and by tracking their best investments, we’ve discovered a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outstripped 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 the details here).
Equally as useful, bullish insider trading sentiment is a second way to look at the world of equities. Obviously, there are a number of motivations for a corporate insider to cut shares of his or her company, but only one, very clear reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this tactic if piggybackers understand where to look (learn more here).
Thus, we’re going to analyze the recent info for Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL).
How have hedgies been trading Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)?
In preparation for the third quarter, a total of 37 of the hedge funds we track were long in this stock, a change of -16% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially.
According to our 13F database, Christian Leone’s Luxor Capital Group had the most valuable position in Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), worth close to $262.8 million, accounting for 7.1% of its total 13F portfolio. Coming in second is JAT Capital Management, managed by John Thaler, which held a $150.5 million position; 6% of its 13F portfolio is allocated to the company. Remaining hedge funds that hold long positions include Rob Citrone’s Discovery Capital Management, Paul Singer’s Elliott Management and Josh Resnick’s Jericho Capital Asset Management.
Since Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) has experienced declining interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of funds that elected to cut their full holdings at the end of the second quarter. Interestingly, Roberto Mignone’s Bridger Management dropped the largest stake of the “upper crust” of funds we watch, valued at an estimated $42 million in stock. Donald Chiboucis’s fund, Columbus Circle Investors, also dumped its stock, about $22.3 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 7 funds at the end of the second quarter.
What have insiders been doing with Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL)?
Insider buying made by high-level executives is particularly usable when the primary stock in question has seen transactions within the past six months. Over the last half-year time period, Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We’ll go over the relationship between both of these indicators in other stocks similar to Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL). These stocks are Penn National Gaming, Inc (NASDAQ:PENN), Carnival Corporation (NYSE:CCL), MGM Resorts International (NYSE:MGM), Royal Caribbean Cruises Ltd. (NYSE:RCL), and Wynn Resorts, Limited (NASDAQ:WYNN). This group of stocks belong to the resorts & casinos industry and their market caps are closest to MPEL’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Penn National Gaming, Inc (NASDAQ:PENN)||36||0||7|
|Carnival Corporation (NYSE:CCL)||31||1||4|
|MGM Resorts International (NYSE:MGM)||37||0||5|
|Royal Caribbean Cruises Ltd. (NYSE:RCL)||29||1||10|
|Wynn Resorts, Limited (NASDAQ:WYNN)||37||0||6|
Using the returns shown by Insider Monkey’s studies, regular investors must always pay attention to hedge fund and insider trading activity, and Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) is no exception.