Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Studio City International Holdings Limited (NYSE:MSC).
Hedge fund interest in Studio City International Holdings Limited (NYSE:MSC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MSC to other stocks including ForeScout Technologies, Inc. (NASDAQ:FSCT), Kronos Worldwide, Inc. (NYSE:KRO), and SciPlay Corporation (NASDAQ:SCPL) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the new hedge fund action regarding Studio City International Holdings Limited (NYSE:MSC).
How have hedgies been trading Studio City International Holdings Limited (NYSE:MSC)?
Heading into the first quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in MSC a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Silver Point Capital, managed by Edward A. Mule, holds the biggest position in Studio City International Holdings Limited (NYSE:MSC). Silver Point Capital has a $212.7 million position in the stock, comprising 16.6% of its 13F portfolio. On Silver Point Capital’s heels is Jonathan Kolatch of Redwood Capital Management, with a $24.1 million position; 3.3% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Israel Englander’s Millennium Management, Jody LaNasa’s Serengeti Asset Management and . In terms of the portfolio weights assigned to each position Silver Point Capital allocated the biggest weight to Studio City International Holdings Limited (NYSE:MSC), around 16.63% of its 13F portfolio. Redwood Capital Management is also relatively very bullish on the stock, dishing out 3.3 percent of its 13F equity portfolio to MSC.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to Studio City International Holdings Limited (NYSE:MSC). We will take a look at ForeScout Technologies, Inc. (NASDAQ:FSCT), Kronos Worldwide, Inc. (NYSE:KRO), SciPlay Corporation (NASDAQ:SCPL), and NextCure, Inc. (NASDAQ:NXTC). This group of stocks’ market valuations are closest to MSC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FSCT | 21 | 419129 | 2 |
| KRO | 13 | 72839 | 4 |
| SCPL | 15 | 101164 | -2 |
| NXTC | 17 | 410458 | 9 |
| Average | 16.5 | 250898 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $239 million in MSC’s case. ForeScout Technologies, Inc. (NASDAQ:FSCT) is the most popular stock in this table. On the other hand Kronos Worldwide, Inc. (NYSE:KRO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Studio City International Holdings Limited (NYSE:MSC) is even less popular than KRO. Hedge funds clearly dropped the ball on MSC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but still beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on MSC as the stock returned 2.3% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
