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Hedge Funds Aren’t Crazy About Eldorado Resorts Inc (ERI) Anymore

Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Eldorado Resorts Inc (NASDAQ:ERI).

Is Eldorado Resorts Inc (NASDAQ:ERI) an outstanding investment right now? The smart money is reducing their bets on the stock. The number of long hedge fund bets went down by 3 recently. Our calculations also showed that ERI isn’t among the 30 most popular stocks among hedge funds.

According to most investors, hedge funds are perceived as slow, outdated investment vehicles of yesteryear. While there are over 8,000 funds trading today, Our researchers choose to focus on the crème de la crème of this group, about 700 funds. These hedge fund managers watch over the lion’s share of the hedge fund industry’s total capital, and by tracking their top stock picks, Insider Monkey has revealed many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Let’s take a look at the key hedge fund action surrounding Eldorado Resorts Inc (NASDAQ:ERI).

What does the smart money think about Eldorado Resorts Inc (NASDAQ:ERI)?

At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the second quarter of 2018. On the other hand, there were a total of 29 hedge funds with a bullish position in ERI at the beginning of this year. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

ERI_dec2018

The largest stake in Eldorado Resorts Inc (NASDAQ:ERI) was held by PAR Capital Management, which reported holding $190.8 million worth of stock at the end of September. It was followed by Highline Capital Management with a $137.2 million position. Other investors bullish on the company included Park West Asset Management, Scopus Asset Management, and Lafitte Capital Management.

Since Eldorado Resorts Inc (NASDAQ:ERI) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of fund managers that slashed their positions entirely last quarter. Interestingly, Alexander Mitchell’s Scopus Asset Management cut the largest investment of all the hedgies watched by Insider Monkey, totaling close to $19.6 million in stock, and Brian Gustavson and Andrew Haley’s 1060 Capital Management was right behind this move, as the fund cut about $13.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Eldorado Resorts Inc (NASDAQ:ERI). These stocks are Patterson-UTI Energy, Inc. (NASDAQ:PTEN), Cousins Properties Incorporated (NYSE:CUZ), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and Selective Insurance Group, Inc. (NASDAQ:SIGI). All of these stocks’ market caps match ERI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTEN 31 472104 -7
CUZ 14 48177 1
ICPT 19 152721 1
SIGI 10 36011 0
Average 18.5 177253 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $970 million in ERI’s case. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is the most popular stock in this table. On the other hand Selective Insurance Group (NASDAQ:SIGI) is the least popular one with only 10 bullish hedge fund positions. Eldorado Resorts Inc (NASDAQ:ERI) 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 PTEN might be a better candidate to consider a long position.

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

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