How Did Boyd Gaming Corporation (BYD) Compare Against Hedge Fund Darlings in 2019?

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 complex research processes 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 pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds’ moves. In this article, we look at what those funds think of Boyd Gaming Corporation (NYSE:BYD) based on that data.

Boyd Gaming Corporation (NYSE:BYD) investors should pay attention to a decrease in hedge fund interest of late. BYD was in 25 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with BYD positions at the end of the previous quarter. Our calculations also showed that BYD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

If you’d ask most investors, hedge funds are assumed to be slow, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, We look at the elite of this group, around 750 funds. These money managers manage the lion’s share of the hedge fund industry’s total asset base, and by paying attention to their unrivaled stock picks, Insider Monkey has brought to light a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

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 Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s take a peek at the recent hedge fund action encompassing Boyd Gaming Corporation (NYSE:BYD).

What have hedge funds been doing with Boyd Gaming Corporation (NYSE:BYD)?

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in BYD a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, PAR Capital Management held the most valuable stake in Boyd Gaming Corporation (NYSE:BYD), which was worth $58.1 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $39.3 million worth of shares. Lomas Capital Management, Long Pond Capital, and Highline Capital Management 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 Diametric Capital allocated the biggest weight to Boyd Gaming Corporation (NYSE:BYD), around 3.56% of its 13F portfolio. Lomas Capital Management is also relatively very bullish on the stock, dishing out 3.29 percent of its 13F equity portfolio to BYD.

Due to the fact that Boyd Gaming Corporation (NYSE:BYD) has experienced a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their positions entirely heading into Q4. It’s worth mentioning that David Gallo’s Valinor Management dropped the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $68.6 million in stock, and Eduardo Abush’s Waterfront Capital Partners was right behind this move, as the fund said goodbye to about $10.6 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 5 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Boyd Gaming Corporation (NYSE:BYD). These stocks are DouYu International Holdings Limited (NASDAQ:DOYU), Power Integrations Inc (NASDAQ:POWI), Pattern Energy Group Inc (NASDAQ:PEGI), and BlackLine, Inc. (NASDAQ:BL). All of these stocks’ market caps match BYD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DOYU 10 50432 10
POWI 12 97704 3
PEGI 13 51412 1
BL 14 125393 -1
Average 12.25 81235 3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $215 million in BYD’s case. BlackLine, Inc. (NASDAQ:BL) is the most popular stock in this table. On the other hand DouYu International Holdings Limited (NASDAQ:DOYU) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Boyd Gaming Corporation (NYSE:BYD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on BYD as the stock returned 45.5% in 2019 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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