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Hedge Funds Have Never Been This Bullish On Red Rock Resorts, Inc. (RRR)

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Red Rock Resorts, Inc. (NASDAQ:RRR)?

Red Rock Resorts, Inc. (NASDAQ:RRR) investors should pay attention to an increase in hedge fund interest lately. RRR was in 25 hedge funds’ portfolios at the end of March. There were 18 hedge funds in our database with RRR holdings at the end of the previous quarter. Our calculations also showed that RRR 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.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the new hedge fund action encompassing Red Rock Resorts, Inc. (NASDAQ:RRR).

Hedge fund activity in Red Rock Resorts, Inc. (NASDAQ:RRR)

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 39% from the fourth quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in RRR a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the most valuable position in Red Rock Resorts, Inc. (NASDAQ:RRR), worth close to $57.3 million, corresponding to 0.4% of its total 13F portfolio. The second largest stake is held by Long Pond Capital, managed by John Khoury, which holds a $27.5 million position; 1.4% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism comprise Ricky Sandler’s Eminence Capital, Paul Reeder and Edward Shapiro’s PAR Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Serengeti Asset Management allocated the biggest weight to Red Rock Resorts, Inc. (NASDAQ:RRR), around 5.78% of its 13F portfolio. 1060 Capital Management is also relatively very bullish on the stock, earmarking 4.29 percent of its 13F equity portfolio to RRR.

As industrywide interest jumped, some big names have been driving this bullishness. Eminence Capital, managed by Ricky Sandler, created the biggest position in Red Rock Resorts, Inc. (NASDAQ:RRR). Eminence Capital had $20.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Isaac Corre’s Governors Lane, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Red Rock Resorts, Inc. (NASDAQ:RRR) but similarly valued. These stocks are Atkore International Group Inc. (NYSE:ATKR), The St. Joe Company (NYSE:JOE), The Liberty Braves Group (NASDAQ:BATRA), and CNX Resources Corporation (NYSE:CNX). All of these stocks’ market caps resemble RRR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATKR 13 59916 -10
JOE 11 490794 1
BATRA 11 55016 1
CNX 24 331831 6
Average 14.75 234389 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $234 million. That figure was $159 million in RRR’s case. CNX Resources Corporation (NYSE:CNX) is the most popular stock in this table. On the other hand The St. Joe Company (NYSE:JOE) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Red Rock Resorts, Inc. (NASDAQ:RRR) 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 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on RRR as the stock returned 60.5% so far in Q2 (through June 10th) 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.