We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Las Vegas Sands Corp. (NYSE:LVS) based on that data.
Is Las Vegas Sands Corp. (NYSE:LVS) a sound investment today? The best stock pickers are taking a pessimistic view. The number of long hedge fund bets shrunk by 5 recently. Our calculations also showed that LVS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. 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. Now let’s go over the fresh hedge fund action surrounding Las Vegas Sands Corp. (NYSE:LVS).
How have hedgies been trading Las Vegas Sands Corp. (NYSE:LVS)?
Heading into the first quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. By comparison, 44 hedge funds held shares or bullish call options in LVS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Melvin Capital Management held the most valuable stake in Las Vegas Sands Corp. (NYSE:LVS), which was worth $370.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $178.4 million worth of shares. D1 Capital Partners, Citadel Investment Group, and Melvin Capital Management 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 Cumberland Associates / Springowl Associates allocated the biggest weight to Las Vegas Sands Corp. (NYSE:LVS), around 5.58% of its 13F portfolio. Melvin Capital Management is also relatively very bullish on the stock, earmarking 3.04 percent of its 13F equity portfolio to LVS.
Seeing as Las Vegas Sands Corp. (NYSE:LVS) has faced declining sentiment from hedge fund managers, logic holds that there lies a certain “tier” of money managers that slashed their entire stakes last quarter. Intriguingly, Israel Englander’s Millennium Management dumped the largest stake of all the hedgies followed by Insider Monkey, comprising about $264.6 million in stock, and John Khoury’s Long Pond Capital was right behind this move, as the fund said goodbye to about $77.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Las Vegas Sands Corp. (NYSE:LVS). We will take a look at America Movil SAB de CV (NYSE:AMX), Walgreens Boots Alliance Inc (NASDAQ:WBA), Air Products & Chemicals, Inc. (NYSE:APD), and Vodafone Group Plc (NASDAQ:VOD). This group of stocks’ market values are similar to LVS’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 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $617 million. That figure was $1256 million in LVS’s case. Air Products & Chemicals, Inc. (NYSE:APD) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 16 bullish hedge fund positions. Las Vegas Sands Corp. (NYSE:LVS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately LVS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LVS were disappointed as the stock returned -32.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.