Did Hedge Funds Make The Right Call On VICI Properties Inc. (VICI) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded VICI Properties Inc. (NYSE:VICI) and determine whether the smart money was really smart about this stock.

VICI Properties Inc. (NYSE:VICI) investors should be aware of a decrease in hedge fund interest of late. Our calculations also showed that VICI 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.

Jeffrey Gates of Gates Capital

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. With all of this in mind we’re going to take a look at the new hedge fund action regarding VICI Properties Inc. (NYSE:VICI).

How have hedgies been trading VICI Properties Inc. (NYSE:VICI)?

At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. By comparison, 37 hedge funds held shares or bullish call options in VICI a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Canyon Capital Advisors was the largest shareholder of VICI Properties Inc. (NYSE:VICI), with a stake worth $301.1 million reported as of the end of September. Trailing Canyon Capital Advisors was Gates Capital Management, which amassed a stake valued at $89.4 million. Soros Fund Management, D E Shaw, and Eminence 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 Canyon Capital Advisors allocated the biggest weight to VICI Properties Inc. (NYSE:VICI), around 10.63% of its 13F portfolio. 1060 Capital Management is also relatively very bullish on the stock, dishing out 8.34 percent of its 13F equity portfolio to VICI.

Since VICI Properties Inc. (NYSE:VICI) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds that decided to sell off their entire stakes in the first quarter. Interestingly, Daniel S. Och’s OZ Management dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $108.2 million in stock, and Jeffrey Talpins’s Element Capital Management was right behind this move, as the fund dumped about $34.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to VICI Properties Inc. (NYSE:VICI). These stocks are SVB Financial Group (NASDAQ:SIVB), Vistra Energy Corp. (NYSE:VST), CenterPoint Energy, Inc. (NYSE:CNP), and Nordson Corporation (NASDAQ:NDSN). This group of stocks’ market valuations resemble VICI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SIVB 30 383904 -5
VST 39 1440172 -10
CNP 32 560894 2
NDSN 22 98925 -7
Average 30.75 620974 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $621 million. That figure was $922 million in VICI’s case. Vistra Energy Corp. (NYSE:VST) is the most popular stock in this table. On the other hand Nordson Corporation (NASDAQ:NDSN) is the least popular one with only 22 bullish hedge fund positions. VICI Properties Inc. (NYSE:VICI) 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 VICI, though not to the same extent, as the stock returned 23.2% during the second quarter and outperformed the market as well.

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