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Did Hedge Funds Drop The Ball On Cedar Fair, L.P. (FUN) ?

Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Cedar Fair, L.P. (NYSE:FUN) and see how the stock is affected by the recent hedge fund activity.

Hedge fund interest in Cedar Fair, L.P. (NYSE:FUN) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sotheby’s (NYSE:BID), PotlatchDeltic Corporation (NASDAQ:PCH), and Owens-Illinois Inc (NYSE:OI) to gather more data points. Our calculations also showed that FUN isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are plenty of gauges stock market investors have at their disposal to evaluate their stock investments. Two of the less utilized gauges are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the market by a healthy margin (see the details here).

Bill Miller

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the key hedge fund action regarding Cedar Fair, L.P. (NYSE:FUN).

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

At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in FUN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds with FUN Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Cedar Fair, L.P. (NYSE:FUN). Arrowstreet Capital has a $25 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is GLG Partners, managed by Noam Gottesman, which holds a $7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish encompass Bill Miller’s Miller Value Partners, Renaissance Technologies and Ken Griffin’s Citadel Investment Group.

Seeing as Cedar Fair, L.P. (NYSE:FUN) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of money managers that slashed their entire stakes in the second quarter. Interestingly, Steven Boyd’s Armistice Capital cut the largest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $10.5 million in stock. Philippe Laffont’s fund, Coatue Management, also dropped its stock, about $0.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Cedar Fair, L.P. (NYSE:FUN). These stocks are Sotheby’s (NYSE:BID), PotlatchDeltic Corporation (NASDAQ:PCH), Owens-Illinois Inc (NYSE:OI), and MakeMyTrip Limited (NASDAQ:MMYT). This group of stocks’ market valuations are closest to FUN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BID 20 739218 2
PCH 12 321079 -5
OI 21 341003 -2
MMYT 11 61298 -1
Average 16 365650 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $366 million. That figure was $47 million in FUN’s case. Owens-Illinois Inc (NYSE:OI) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Cedar Fair, L.P. (NYSE:FUN) is even less popular than MMYT. Hedge funds clearly dropped the ball on FUN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on FUN as the stock returned 24.4% during the third quarter and outperformed the market by an even larger margin.

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

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