Did Hedge Funds Make The Right Call On Boyd Gaming Corporation (BYD) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Boyd Gaming Corporation (NYSE:BYD) based on that data and determine whether they were really smart about the stock.

Is Boyd Gaming Corporation (NYSE:BYD) the right investment to pursue these days? Hedge funds were in a pessimistic mood. The number of bullish hedge fund bets fell by 4 in recent months. Our calculations also showed that BYD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Parag Vora - HG Vora Capital

Parag Vora of HG Vora Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to go over the fresh hedge fund action regarding Boyd Gaming Corporation (NYSE:BYD).

How have hedgies been trading Boyd Gaming Corporation (NYSE:BYD)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in BYD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, HG Vora Capital Management was the largest shareholder of Boyd Gaming Corporation (NYSE:BYD), with a stake worth $43.3 million reported as of the end of September. Trailing HG Vora Capital Management was PAR Capital Management, which amassed a stake valued at $27.5 million. GAMCO Investors, Point72 Asset Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to Boyd Gaming Corporation (NYSE:BYD), around 4.22% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, dishing out 2.92 percent of its 13F equity portfolio to BYD.

Since Boyd Gaming Corporation (NYSE:BYD) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers that slashed their full holdings by the end of the first quarter. Intriguingly, Daniel Lascano’s Lomas Capital Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising close to $29.1 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $15.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Boyd Gaming Corporation (NYSE:BYD) but similarly valued. These stocks are Fox Factory Holding Corp (NASDAQ:FOXF), Bottomline Technologies (de), Inc. (NASDAQ:EPAY), Goosehead Insurance, Inc. (NASDAQ:GSHD), and Alliance Data Systems Corporation (NYSE:ADS). This group of stocks’ market values are similar to BYD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FOXF 10 15115 -3
EPAY 18 73371 1
GSHD 11 62673 2
ADS 30 245871 -15
Average 17.25 99258 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $179 million in BYD’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Fox Factory Holding Corp (NASDAQ:FOXF) is the least popular one with only 10 bullish hedge fund positions. Boyd Gaming Corporation (NYSE:BYD) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on BYD as the stock returned 44.9% in Q2 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.