We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Wynn Resorts, Limited (NASDAQ:WYNN).
Is WYNN a good stock to buy now? Wynn Resorts, Limited (NASDAQ:WYNN) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. Wynn Resorts, Limited (NASDAQ:WYNN) was in 43 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 50. Our calculations also showed that WYNN 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely 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 review the fresh hedge fund action surrounding Wynn Resorts, Limited (NASDAQ:WYNN).
Do Hedge Funds Think WYNN Is A Good Stock To Buy Now?
At the end of September, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in WYNN a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Melvin Capital Management, managed by Gabriel Plotkin, holds the number one position in Wynn Resorts, Limited (NASDAQ:WYNN). Melvin Capital Management has a $138.2 million position in the stock, comprising 0.7% of its 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $77 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Gabriel Plotkin’s Melvin Capital Management, D. E. Shaw’s D E Shaw and Philippe Laffont’s Coatue Management. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Wynn Resorts, Limited (NASDAQ:WYNN), around 5.76% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, earmarking 5.48 percent of its 13F equity portfolio to WYNN.
Because Wynn Resorts, Limited (NASDAQ:WYNN) has witnessed declining sentiment from the smart money, we can see that there was a specific group of fund managers that decided to sell off their entire stakes in the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $33.3 million in stock, and Daniel S. Och’s OZ Management was right behind this move, as the fund dumped about $25.5 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Wynn Resorts, Limited (NASDAQ:WYNN) but similarly valued. We will take a look at Mobile TeleSystems PJSC (NYSE:MBT), XPO Logistics Inc (NYSE:XPO), AGNC Investment Corp. (NASDAQ:AGNC), Iron Mountain Incorporated (NYSE:IRM), Magellan Midstream Partners, L.P. (NYSE:MMP), Amedisys Inc (NASDAQ:AMED), and Mylan N.V. (NASDAQ:MYL). This group of stocks’ market values are similar to WYNN’s market value.
|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 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $763 million. That figure was $510 million in WYNN’s case. Mylan Inc. (NASDAQ:MYL) is the most popular stock in this table. On the other hand Mobile TeleSystems PJSC (NYSE:MBT) is the least popular one with only 10 bullish hedge fund positions. Wynn Resorts, Limited (NASDAQ:WYNN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WYNN is 72.2. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on WYNN as the stock returned 55% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.