Is MCRI A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Monarch Casino & Resort, Inc. (NASDAQ:MCRI) based on that data.

Is MCRI a good stock to buy now? Monarch Casino & Resort, Inc. (NASDAQ:MCRI) has experienced a decrease in hedge fund sentiment in recent months. Monarch Casino & Resort, Inc. (NASDAQ:MCRI) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that MCRI isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a look at the fresh hedge fund action regarding Monarch Casino & Resort, Inc. (NASDAQ:MCRI).

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

At third quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MCRI over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MCRI A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Park West Asset Management, managed by Peter S. Park, holds the number one position in Monarch Casino & Resort, Inc. (NASDAQ:MCRI). Park West Asset Management has a $40.7 million position in the stock, comprising 1.6% of its 13F portfolio. Coming in second is Bryant Regan of Lafitte Capital Management, with a $25.9 million position; the fund has 27.8% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and Brian Gustavson and Andrew Haley’s 1060 Capital Management. In terms of the portfolio weights assigned to each position Lafitte Capital Management allocated the biggest weight to Monarch Casino & Resort, Inc. (NASDAQ:MCRI), around 27.83% of its 13F portfolio. 1060 Capital Management is also relatively very bullish on the stock, designating 6.04 percent of its 13F equity portfolio to MCRI.

Judging by the fact that Monarch Casino & Resort, Inc. (NASDAQ:MCRI) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few funds who sold off their full holdings heading into Q4. Interestingly, Mark McMeans’s Brasada Capital Management dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $4.8 million in stock, and Brandon Osten’s Venator Capital Management was right behind this move, as the fund said goodbye to about $1.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Monarch Casino & Resort, Inc. (NASDAQ:MCRI). We will take a look at Alexander & Baldwin Inc (NYSE:ALEX), GreenSky, Inc. (NASDAQ:GSKY), Associated Capital Group, Inc. (NYSE:AC), Endurance International Group Holdings Inc (NASDAQ:EIGI), Southside Bancshares, Inc. (NASDAQ:SBSI), Provident Financial Services, Inc. (NYSE:PFS), and Pliant Therapeutics, Inc. (NASDAQ:PLRX). This group of stocks’ market caps are similar to MCRI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALEX 15 33459 2
GSKY 12 23357 -1
AC 5 56413 0
EIGI 16 95183 1
SBSI 8 31525 -3
PFS 10 18111 0
PLRX 11 157744 -2
Average 11 59399 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $87 million in MCRI’s case. Endurance International Group Holdings Inc (NASDAQ:EIGI) is the most popular stock in this table. On the other hand Associated Capital Group, Inc. (NYSE:AC) is the least popular one with only 5 bullish hedge fund positions. Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MCRI is 42.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on MCRI as the stock returned 21.2% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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