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Cedar Fair, L.P. (FUN): Are Hedge Funds Right About This Stock?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Cedar Fair, L.P. (NYSE:FUN)? The smart money sentiment can provide an answer to this question.

Cedar Fair, L.P. (NYSE:FUN) investors should be aware of an increase in support from the world’s most elite money managers recently. Our calculations also showed that fun isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

RENAISSANCE TECHNOLOGIES

We’re going to take a look at the new hedge fund action regarding Cedar Fair, L.P. (NYSE:FUN).

What have hedge funds been doing with Cedar Fair, L.P. (NYSE:FUN)?

At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from the second quarter of 2018. On the other hand, there were a total of 11 hedge funds with a bullish position in FUN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds With FUN Positions

Of the funds tracked by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in Cedar Fair, L.P. (NYSE:FUN), worth close to $7.9 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $7.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions include Steven Boyd’s Armistice Capital, Noam Gottesman’s GLG Partners and Paul Marshall and Ian Wace’s Marshall Wace LLP.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Cedar Fair, L.P. (NYSE:FUN). Arrowstreet Capital had $7.2 million invested in the company at the end of the quarter. Steven Boyd’s Armistice Capital also initiated a $7.1 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, Philippe Laffont’s Coatue Management, and Ken Griffin’s Citadel Investment Group.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cedar Fair, L.P. (NYSE:FUN) but similarly valued. We will take a look at Federated Investors Inc (NYSE:FII), Delek US Holdings, Inc. (NYSE:DK), GATX Corporation (NYSE:GATX), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks’ market values are closest to FUN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FII 15 146247 0
DK 27 233596 -4
GATX 14 221069 3
COLB 10 132785 -1
Average 16.5 183424 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $40 million in FUN’s case. Delek US Holdings, Inc. (NYSE:DK) is the most popular stock in this table. On the other hand Columbia Banking System Inc (NASDAQ:COLB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Cedar Fair, L.P. (NYSE:FUN) is even less popular than COLB. Hedge funds dodged a bullet by taking a bearish stance towards FUN. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately FUN wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); FUN investors were disappointed as the stock returned 14.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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