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Hedge Funds Not In the Mood To Gamble With Boyd Gaming Corporation (BYD)

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 Boyd Gaming Corporation (NYSE:BYD)?

Boyd Gaming Corporation (NYSE:BYD) shareholders have witnessed a decrease in hedge fund sentiment lately. Our calculations also showed that BYD 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Paul Reeder PAR Capital Management

Paul Reeder of PAR Capital Management

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 go over the key hedge fund action regarding Boyd Gaming Corporation (NYSE:BYD).

Hedge fund activity in Boyd Gaming Corporation (NYSE:BYD)

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in BYD a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, HG Vora Capital Management held the most valuable stake in Boyd Gaming Corporation (NYSE:BYD), which was worth $43.3 million at the end of the third quarter. On the second spot was PAR Capital Management which amassed $27.5 million worth of shares. GAMCO Investors, Point72 Asset Management, and Citadel Investment Group 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 HG Vora Capital Management allocated the biggest weight to Boyd Gaming Corporation (NYSE:BYD), around 4.22% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, designating 2.92 percent of its 13F equity portfolio to BYD.

Because Boyd Gaming Corporation (NYSE:BYD) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies who sold off their positions entirely last quarter. Intriguingly, Daniel Lascano’s Lomas Capital Management dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $29.1 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $15.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Boyd Gaming Corporation (NYSE:BYD). These stocks are Fox Factory Holding Corp (NASDAQ:FOXF), Bottomline Technologies (de), Inc. (NASDAQ:EPAY), Goosehead Insurance, Inc. (NASDAQ:GSHD), and Alliance Data Systems Corporation (NYSE:ADS). This group of stocks’ market caps resemble BYD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FOXF 10 15115 -3
EPAY 18 73371 1
GSHD 11 62673 2
ADS 30 245871 -15
Average 17.25 99258 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $179 million in BYD’s case. Alliance Data Systems Corporation (NYSE:ADS) is the most popular stock in this table. On the other hand Fox Factory Holding Corp (NASDAQ:FOXF) is the least popular one with only 10 bullish hedge fund positions. Boyd Gaming Corporation (NYSE:BYD) 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on BYD as the stock returned 48.3% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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