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Did Hedge Funds Make The Right Call On Six Flags Entertainment Corp (SIX) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Six Flags Entertainment Corp (NYSE:SIX) and determine whether hedge funds skillfully traded this stock.

Six Flags Entertainment Corp (NYSE:SIX) was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. SIX has seen a decrease in hedge fund sentiment lately. There were 38 hedge funds in our database with SIX positions at the end of the previous quarter. Our calculations also showed that SIX 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.

Kerr Neilson of Platinum Asset 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. Now we’re going to check out the new hedge fund action surrounding Six Flags Entertainment Corp (NYSE:SIX).

How are hedge funds trading Six Flags Entertainment Corp (NYSE:SIX)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SIX over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is SIX A Good Stock To Buy?

Among these funds, H Partners Management held the most valuable stake in Six Flags Entertainment Corp (NYSE:SIX), which was worth $97.8 million at the end of the third quarter. On the second spot was Impala Asset Management which amassed $32.8 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and Arrowstreet Capital 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 H Partners Management allocated the biggest weight to Six Flags Entertainment Corp (NYSE:SIX), around 37.69% of its 13F portfolio. Altai Capital is also relatively very bullish on the stock, designating 15.3 percent of its 13F equity portfolio to SIX.

Due to the fact that Six Flags Entertainment Corp (NYSE:SIX) has experienced falling interest from the entirety of the hedge funds we track, we can see that there were a few hedgies who sold off their positions entirely by the end of the first quarter. At the top of the heap, Amy Minella’s Cardinal Capital cut the biggest stake of the 750 funds monitored by Insider Monkey, totaling an estimated $104.2 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its stock, about $38.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 8 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Six Flags Entertainment Corp (NYSE:SIX) but similarly valued. These stocks are Asbury Automotive Group, Inc. (NYSE:ABG), Heron Therapeutics Inc (NASDAQ:HRTX), Marcus & Millichap Inc (NYSE:MMI), and Viper Energy Partners LP (NASDAQ:VNOM). This group of stocks’ market values are similar to SIX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ABG 19 248518 -5
HRTX 19 223346 0
MMI 9 83327 -4
VNOM 11 29548 -5
Average 14.5 146185 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $240 million in SIX’s case. Asbury Automotive Group, Inc. (NYSE:ABG) is the most popular stock in this table. On the other hand Marcus & Millichap Inc (NYSE:MMI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Six Flags Entertainment Corp (NYSE:SIX) is more popular among hedge funds. 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on SIX as the stock returned 53.2% in Q2 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.

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