Rising net demand for allocating to hedge funds has hit a three-year high, as the $3 trillion hedge fund industry scored high marks among investors for its performance during the 12-month period from June 2017 to June 2018, despite persistent high fees. 66% of investors felt their expectations were met or exceeded during the period according to survey data from Preqin, up from a dismal 21% two years earlier.
Insider Monkey’s flagship “Best Performing Hedge Funds Strategy” has returned over 50% in the last year, destroying the market by 29 percentage points. Since its May 2014 inception, the easy-to-follow strategy has returned 121%, beating the bull market by more than 54 percentage points. The hedge fund strategy’s small number of quarterly picks often span a range of industries. In our May 16 newsletter, customer service platform Zendesk Inc (NYSE:ZEN) and pharmaceutical company FibroGen Inc (NASDAQ:FGEN), each of which gained over 10% during the following 2.5 months, were among the seven stock picks for the quarter.
Check out a detailed analysis of Insider Monkey’s past performance and quarterly stock picks for all the details.
In this article, we’ll take a look at hedge funds’ top stock picks in various industries, using Insider Monkey’s own data that covers the 645 hedge funds in our system which filed 13Fs for the June 30 reporting period. Included on the list are hedge funds’ favorite restaurant, aerospace, and casino stocks, beginning with the most popular video game stock among hedge funds.
Hedge Funds’ #1 Video Game Stock Pick: Electronic Arts Inc. (NASDAQ:EA)
Number of Hedge Fund Shareholders of EA (as of June 30): 79
Value of Hedge Funds’ Holdings in EA (as of June 30): $6.32 billion
There was a large inflow of hedge funds into Electronic Arts Inc. (NASDAQ:EA) during the second-quarter, pushing it well past Activision Blizzard, Inc. (NASDAQ:ATVI) (66 hedge funds) into a commanding lead among video game stocks (note that we don’t count Microsoft Corporation (NASDAQ:MSFT), the second-most popular tech stock among hedge funds, as a gaming stock, owing to its gaming division’s minimal impact on the company’s overall performance). Hedge fund ownership of EA jumped by 18 to 79, while the amount of money invested in the company jumped by slightly over $1 billion. Jacob Doft’s Highline Capital (486,300 shares) and Christopher Medlock James’ Partner Fund Management (291,101 shares) were some of the many funds to buy EA shares in Q2.
A growing wave of loot box legislation against gaming companies like Electronic Arts Inc. (NASDAQ:EA) due to the gambling-like nature of their in-game reward systems has done little to dampen investor enthusiasm for those companies thanks to surging earnings. Electronic Arts Inc. (NASDAQ:EA) recently lowered its fiscal 2019 net booking guidance to $5.2 billion from $5.55 billion, citing the delay of Battlefield V in addition to currency exchange headwinds.
Hedge Funds’ #1 Casino Stock Pick: MGM Resorts International (NYSE:MGM)
Number of Hedge Fund Shareholders of MGM (as of June 30): 51
Value of Hedge Funds’ Holdings in MGM (as of June 30): $2.63 billion
MGM Resorts International (NYSE:MGM) is the top-ranked casino stock, leading Wynn Resorts, Limited (NASDAQ:WYNN) by seven hedge funds. Hedge fund ownership of MGM did fall by four during the second-quarter to 51, while the value of hedge funds’ holdings fell by 33% to $2.63 billion. Eric W. Mandelblatt’s Soroban Capital Partners slashed its MGM holding by 44% to 12.46 million shares during Q2.
MGM Resorts International (NYSE:MGM) is poised to capitalize on the legalization of sports betting in the U.S with the pending launch of a sports betting app. Resorts Casino Hotel, in partnership with DraftKings, became the first casino in the U.S to accept mobile sports bets last week, on a limited basis. $150 billion is currently bet on sports each year in the U.S and that figure is expected to grow rapidly thanks to legalization, which went into effect earlier this year.
On the next page we’ll share hedge funds’ top stock picks in the restaurant, tobacco, and aerospace industries.