Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Monarch Casino & Resort, Inc. (NASDAQ:MCRI) the right pick for your portfolio? The smart money is genuinely in a bearish mood. The number of long hedge fund investments fell by 4 lately. MCRI was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. There were 14 hedge funds in our database with MCRI positions at the end of the previous quarter. At the end of this article we will also compare MCRI to other stocks including NewLink Genetics Corp (NASDAQ:NLNK), Winmark Corporation (NASDAQ:WINA), and La Jolla Pharmaceutical Company (NASDAQ:LJPC) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s take a look at the latest action encompassing Monarch Casino & Resort, Inc. (NASDAQ:MCRI).
Hedge fund activity in Monarch Casino & Resort, Inc. (NASDAQ:MCRI)
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in MCRI over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Bryant Regan of Lafitte Capital Management holds the most valuable position in Monarch Casino & Resort, Inc. (NASDAQ:MCRI). Lafitte Capital Management has a $17.3 million position in the stock, comprising 9.8% of its 13F portfolio. The second largest stake is held by Peter S. Park of Park West Asset Management, with a $11.3 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Robert Hockett’s Covalent Capital Partners, Jim Simons’ Renaissance Technologies which is one of the largest hedge funds in the world and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cashed in their entire stakes in the stock during the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management cashed in the biggest investment of all the investors studied by Insider Monkey, comprising an estimated $2 million in stock. Ken Grossman and Glen Schneider’s fund, SG Capital Management, also sold off its stock, about $0.8 million worth.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Monarch Casino & Resort, Inc. (NASDAQ:MCRI) but similarly valued. These stocks are NewLink Genetics Corp (NASDAQ:NLNK), Winmark Corporation (NASDAQ:WINA), La Jolla Pharmaceutical Company (NASDAQ:LJPC), and Sun Bancorp, Inc. /NJ (NASDAQ:SNBC). All of these stocks’ market caps are similar to MCRI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NLNK | 12 | 52368 | -1 |
| WINA | 3 | 62096 | 0 |
| LJPC | 10 | 156944 | 1 |
| SNBC | 4 | 128657 | -2 |
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $47 million in MCRI’s case. NewLink Genetics Corp (NASDAQ:NLNK) is the most popular stock in this table. On the other hand Winmark Corporation (NASDAQ:WINA) is the least popular one with only 3 bullish hedge fund positions. Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NLNK might be a better candidate to consider taking a long position in.
Disclosure: None
