Is Caesars Entertainment (CZR) Stock A Buy or Sell?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Caesars Entertainment Inc. (NASDAQ:CZR), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Caesars Entertainment Inc. (NASDAQ:CZR) going to take off soon? Prominent investors were turning less bullish. The number of long hedge fund positions shrunk by 3 in recent months. Caesars Entertainment Inc. (NASDAQ:CZR) was in 71 hedge funds’ portfolios at the end of December. The all time high for this statistic is 74. Our calculations also showed that CZR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 74 hedge funds in our database with CZR positions at the end of the third quarter.

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 124 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.

Robert Pohly of Samlyn Capital

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Do Hedge Funds Think CZR Is A Good Stock To Buy Now?

At the end of December, a total of 71 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CZR over the last 22 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is CZR A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, holds the largest position in Caesars Entertainment Inc. (NASDAQ:CZR). Canyon Capital Advisors has a $225.1 million position in the stock, comprising 9.7% of its 13F portfolio. Coming in second is Jericho Capital Asset Management, managed by Josh Resnick, which holds a $91.7 million position; 2.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism encompass Robert Pohly’s Samlyn Capital, Roberto Mignone’s Bridger Management and Glen Kacher’s Light Street Capital. In terms of the portfolio weights assigned to each position Lafitte Capital Management allocated the biggest weight to Caesars Entertainment Inc. (NASDAQ:CZR), around 35.58% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, setting aside 13.59 percent of its 13F equity portfolio to CZR.

Judging by the fact that Caesars Entertainment Inc. (NASDAQ:CZR) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers who were dropping their entire stakes last quarter. Intriguingly, Dan Loeb’s Third Point sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $56.1 million in stock. Robert Emil Zoellner’s fund, Alpine Associates, also sold off its stock, about $43.5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Caesars Entertainment Inc. (NASDAQ:CZR) but similarly valued. These stocks are CarMax Inc (NYSE:KMX), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Waters Corporation (NYSE:WAT), Hewlett Packard Enterprise Company (NYSE:HPE), Citizens Financial Group Inc (NYSE:CFG), 10x Genomics, Inc. (NASDAQ:TXG), and Celanese Corporation (NYSE:CE). This group of stocks’ market valuations are closest to CZR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KMX 46 1485714 -8
SHG 7 27734 3
WAT 30 1993478 -2
HPE 30 923308 -4
CFG 38 453830 2
TXG 33 745283 2
CE 33 997491 7
Average 31 946691 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $1439 million in CZR’s case. CarMax Inc (NYSE:KMX) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Caesars Entertainment Inc. (NASDAQ:CZR) is more popular among hedge funds. Our overall hedge fund sentiment score for CZR is 80.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7% in 2021 through March 12th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on CZR as the stock returned 35.5% since the end of December (through 3/12) 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.