The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards MGM Resorts International (NYSE:MGM).
Is MGM Resorts International (NYSE:MGM) an attractive investment now? Prominent investors are becoming less confident. The number of long hedge fund positions were trimmed by 9 lately. MGM Resorts International (NYSE:MGM) was in 49 hedge funds’ portfolios at the end of September. There were 58 hedge funds in our database with MGM Resorts International (NYSE:MGM) positions at the end of the previous quarter. At the end of this article, we will also compare MGM Resorts International (NYSE:MGM) to other stocks including Goldcorp Inc. (USA) (NYSE:GG), Grifols SA, Barcelona (NASDAQ:GRFS), and Lam Research Corporation (NASDAQ:LRCX) to get a better sense of its popularity.
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To most stock holders, hedge funds are viewed as worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds in operation at the moment, Hedge fund experts at Insider Monkey look at the moguls of this club, approximately 700 funds. These hedge fund managers have their hands on bulk of all hedge funds’ total capital, and by tracking their unrivaled investments, Insider Monkey has come up with numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s review the new action regarding MGM Resorts International (NYSE:MGM).
Hedge fund activity in MGM Resorts International (NYSE:MGM)
Heading into Q4, a total of 49 of the hedge funds tracked by Insider Monkey were bullish in this stock, a decline of 16% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Daniel S. Och’s OZ Management had the largest position in MGM Resorts International (NYSE:MGM), worth close to $292.2 million, comprising 1% of its total 13F portfolio. The second most bullish hedge fund manager is Canyon Capital Advisors, led by Joshua Friedman and Mitchell Julis, holding a $245.3 million position; 6.7% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Bain Capital’s Brookside Capital, Jeffrey Gates’ Gates Capital Management and Jonathon Jacobson’s Highfields Capital Management.
Seeing as MGM Resorts International (NYSE:MGM) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few funds who were dropping their entire stakes last quarter. At the top of the heap, John Khoury’s Long Pond Capital cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth close to $43.8 million in stock. John Orrico’s fund, Water Island Capital, also dropped its stock, about $15.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 9 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to MGM Resorts International (NYSE:MGM). These stocks are Goldcorp Inc. (USA) (NYSE:GG), Grifols SA, Barcelona (NASDAQ:GRFS), Lam Research Corporation (NASDAQ:LRCX), and Jarden Corp (NYSE:JAH). This group of stocks’ market valuations match MGM Resorts International (NYSE:MGM)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GG | 29 | 871283 | 5 |
| GRFS | 14 | 648378 | 1 |
| LRCX | 45 | 1043496 | -3 |
| JAH | 42 | 1462444 | 9 |
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1.01 billion. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand Grifols SA, Barcelona (NASDAQ:GRFS) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks MGM Resorts International (NYSE:MGM) is more popular among hedge funds. Considering that hedge funds are more fond of MGM than the comparables mentioned, it may be a good idea to analyze MGM in detail despite the decrease in the total number of hedge funds long the stock.
