Is SIX A Good Stock To Buy According To Hedge Funds?

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 Six Flags Entertainment Corp (NYSE:SIX) based on that data.

Is SIX a good stock to buy? Six Flags Entertainment Corp (NYSE:SIX) has experienced an increase in activity from the world’s largest hedge funds recently. Six Flags Entertainment Corp (NYSE:SIX) was in 37 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 41. Our calculations also showed that SIX 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.

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 66 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.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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 take a look at the fresh hedge fund action surrounding Six Flags Entertainment Corp (NYSE:SIX).

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

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. By comparison, 41 hedge funds held shares or bullish call options in SIX a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, H Partners Management was the largest shareholder of Six Flags Entertainment Corp (NYSE:SIX), with a stake worth $158.3 million reported as of the end of September. Trailing H Partners Management was Thunderbird Partners, which amassed a stake valued at $55 million. Samlyn Capital, Jericho Capital Asset Management, and Arrowstreet Capital 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 Altai Capital allocated the biggest weight to Six Flags Entertainment Corp (NYSE:SIX), around 34.52% of its 13F portfolio. H Partners Management is also relatively very bullish on the stock, designating 27.37 percent of its 13F equity portfolio to SIX.

As aggregate interest increased, key money managers have jumped into Six Flags Entertainment Corp (NYSE:SIX) headfirst. Thunderbird Partners, managed by David Fear, initiated the biggest position in Six Flags Entertainment Corp (NYSE:SIX). Thunderbird Partners had $55 million invested in the company at the end of the quarter. Matthew Halbower’s Pentwater Capital Management also made a $13.4 million investment in the stock during the quarter. The following funds were also among the new SIX investors: John Smith Clark’s Southpoint Capital Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Nehal Chopra’s Ratan Capital Group.

Let’s go over hedge fund activity in other stocks similar to Six Flags Entertainment Corp (NYSE:SIX). We will take a look at AMTD International Inc. (NYSE:HKIB), MaxLinear, Inc. (NYSE:MXL), Hub Group Inc (NASDAQ:HUBG), Sunstone Hotel Investors Inc (NYSE:SHO), Sonic Automotive Inc (NYSE:SAH), Piedmont Office Realty Trust, Inc. (NYSE:PDM), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks’ market caps resemble SIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HKIB 1 10 0
MXL 18 76669 3
HUBG 20 191042 -1
SHO 17 191049 -6
SAH 17 81089 5
PDM 14 46030 3
COLB 11 77178 2
Average 14 94724 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $528 million in SIX’s case. Hub Group Inc (NASDAQ:HUBG) is the most popular stock in this table. On the other hand AMTD International Inc. (NYSE:HKIB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Six Flags Entertainment Corp (NYSE:SIX) is more popular among hedge funds. Our overall hedge fund sentiment score for SIX is 86.1. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on SIX as the stock returned 66.6% since the end of September (through 12/18) 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.