Red Rock Resorts, Inc. (RRR): Hedge Funds Are Snapping Up

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Red Rock Resorts, Inc. (NASDAQ:RRR).

Is Red Rock Resorts, Inc. (NASDAQ:RRR) a buy, sell, or hold? The smart money was taking an optimistic view. The number of long hedge fund bets rose by 2 in recent months. Red Rock Resorts, Inc. (NASDAQ:RRR) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 30. Our calculations also showed that RRR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s analyze the recent hedge fund action encompassing Red Rock Resorts, Inc. (NASDAQ:RRR).

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

Heading into the second quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the fourth quarter of 2020. By comparison, 25 hedge funds held shares or bullish call options in RRR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is RRR A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Ricky Sandler’s Eminence Capital has the biggest position in Red Rock Resorts, Inc. (NASDAQ:RRR), worth close to $209.4 million, accounting for 2.6% of its total 13F portfolio. Sitting at the No. 2 spot is Diamond Hill Capital, managed by Matthew Stadelman, which holds a $182.6 million position; 0.7% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and Paul Reeder and Edward Shapiro’s PAR Capital Management. In terms of the portfolio weights assigned to each position Eminence Capital allocated the biggest weight to Red Rock Resorts, Inc. (NASDAQ:RRR), around 2.59% of its 13F portfolio. Thames Capital Management is also relatively very bullish on the stock, earmarking 2.03 percent of its 13F equity portfolio to RRR.

As industrywide interest jumped, specific money managers have jumped into Red Rock Resorts, Inc. (NASDAQ:RRR) headfirst. Intrinsic Edge Capital, managed by Mark Coe, created the most valuable position in Red Rock Resorts, Inc. (NASDAQ:RRR). Intrinsic Edge Capital had $12.8 million invested in the company at the end of the quarter. Frank Fu’s CaaS Capital also initiated a $7 million position during the quarter. The other funds with brand new RRR positions are Bryant Regan’s Lafitte Capital Management, Graham F. Smith’s Franklin Street Capital, and Qing Li’s Sciencast Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Red Rock Resorts, Inc. (NASDAQ:RRR) but similarly valued. These stocks are 360 DigiTech, Inc. (NASDAQ:QFIN), Asbury Automotive Group, Inc. (NYSE:ABG), Array Biopharma Inc (NASDAQ:ARRY), CONMED Corporation (NASDAQ:CNMD), Wingstop Inc (NASDAQ:WING), Tenable Holdings, Inc. (NASDAQ:TENB), and Advantage Solutions Inc. (NASDAQ:ADV). This group of stocks’ market values match RRR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
QFIN 19 91928 5
ABG 20 903147 -3
ARRY 30 486103 1
CNMD 23 236802 -5
WING 23 233958 -5
TENB 32 532519 -7
ADV 24 605969 5
Average 24.4 441489 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $607 million in RRR’s case. Tenable Holdings, Inc. (NASDAQ:TENB) is the most popular stock in this table. On the other hand 360 DigiTech, Inc. (NASDAQ:QFIN) is the least popular one with only 19 bullish hedge fund positions. Red Rock Resorts, Inc. (NASDAQ:RRR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RRR is 69.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on RRR as the stock returned 27.8% since the end of Q1 (through 7/9) 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.