At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards MGM Resorts International (NYSE:MGM).
Is MGM a good stock to buy now? MGM Resorts International (NYSE:MGM) investors should pay attention to an increase in hedge fund interest recently. MGM Resorts International (NYSE:MGM) was in 41 hedge funds’ portfolios at the end of September. The all time high for this statistic is 67. There were 32 hedge funds in our database with MGM holdings at the end of June. Our calculations also showed that MGM 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind let’s go over the fresh hedge fund action regarding MGM Resorts International (NYSE:MGM).
Do Hedge Funds Think MGM Is A Good Stock To Buy Now?
At Q3’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MGM over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in MGM Resorts International (NYSE:MGM) was held by Corvex Capital, which reported holding $490.2 million worth of stock at the end of September. It was followed by SRS Investment Management with a $190.5 million position. Other investors bullish on the company included Orbis Investment Management, Southeastern Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Corvex Capital allocated the biggest weight to MGM Resorts International (NYSE:MGM), around 28.17% of its 13F portfolio. SRS Investment Management is also relatively very bullish on the stock, earmarking 3.52 percent of its 13F equity portfolio to MGM.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Orbis Investment Management, managed by William B. Gray, initiated the largest position in MGM Resorts International (NYSE:MGM). Orbis Investment Management had $183.3 million invested in the company at the end of the quarter. Mason Hawkins’s Southeastern Asset Management also made a $107.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeff Osher’s No Street Capital, Morris Mark’s Mark Asset Management, and John Smith Clark’s Southpoint Capital Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to MGM Resorts International (NYSE:MGM). We will take a look at Avalara, Inc. (NYSE:AVLR), Avery Dennison Corporation (NYSE:AVY), NICE Ltd (NASDAQ:NICE), Omnicom Group Inc. (NYSE:OMC), Ubiquiti Inc. (NYSE:UI), Advance Auto Parts, Inc. (NYSE:AAP), and Halliburton Company (NYSE:HAL). This group of stocks’ market caps are closest to MGM’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $741 million. That figure was $1237 million in MGM’s case. Avalara, Inc. (NYSE:AVLR) is the most popular stock in this table. On the other hand Avery Dennison Corporation (NYSE:AVY) is the least popular one with only 16 bullish hedge fund positions. MGM Resorts International (NYSE:MGM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGM is 70. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on MGM as the stock returned 35.7% since the end of Q3 (through 12/14) 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.