How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Vail Resorts, Inc. (NYSE:MTN) and determine whether hedge funds had an edge regarding this stock.
Hedge fund interest in Vail Resorts, Inc. (NYSE:MTN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MTN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hill-Rom Holdings, Inc. (NYSE:HRC), Vornado Realty Trust (NYSE:VNO), and Reynolds Consumer Products Inc. (NASDAQ:REYN) to gather more data points. Our calculations also showed that MTN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
According to most stock holders, hedge funds are assumed to be worthless, old investment tools of yesteryear. While there are greater than 8000 funds trading at the moment, Our experts choose to focus on the crème de la crème of this club, around 850 funds. These investment experts orchestrate the lion’s share of the hedge fund industry’s total capital, and by paying attention to their best investments, Insider Monkey has brought to light numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind let’s take a look at the key hedge fund action encompassing Vail Resorts, Inc. (NYSE:MTN).
Hedge fund activity in Vail Resorts, Inc. (NYSE:MTN)
At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the first quarter of 2020. By comparison, 33 hedge funds held shares or bullish call options in MTN a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Vail Resorts, Inc. (NYSE:MTN) was held by Select Equity Group, which reported holding $322.8 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $101.9 million position. Other investors bullish on the company included Ariel Investments, Jericho Capital Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to Vail Resorts, Inc. (NYSE:MTN), around 4.54% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, setting aside 3.99 percent of its 13F equity portfolio to MTN.
Since Vail Resorts, Inc. (NYSE:MTN) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there were a few hedge funds who were dropping their full holdings last quarter. At the top of the heap, Jack Woodruff’s Candlestick Capital Management dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $25.8 million in stock, and Ricky Sandler’s Eminence Capital was right behind this move, as the fund dropped about $24.7 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vail Resorts, Inc. (NYSE:MTN) but similarly valued. These stocks are Hill-Rom Holdings, Inc. (NYSE:HRC), Vornado Realty Trust (NYSE:VNO), Reynolds Consumer Products Inc. (NASDAQ:REYN), Exelixis, Inc. (NASDAQ:EXEL), Americold Realty Trust (NYSE:COLD), Formula One Group (NASDAQ:FWONA), and Mohawk Industries, Inc. (NYSE:MHK). This group of stocks’ market valuations are similar to MTN’s market valuation.
|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 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $542 million. That figure was $753 million in MTN’s case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Vornado Realty Trust (NYSE:VNO) is the least popular one with only 17 bullish hedge fund positions. Vail Resorts, Inc. (NYSE:MTN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTN is 78.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on MTN as the stock returned 19.5% since Q2 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.