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Six Flags Entertainment Corp (SIX) Hedge Funds Are Snapping Up

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 30 stock picks outperformed the S&P 500 Index by 4 percentage points through the middle of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Six Flags Entertainment Corp (NYSE:SIX) investors should pay attention to an increase in hedge fund interest lately. SIX was in 25 hedge funds’ portfolios at the end of the third quarter of 2018. There were 16 hedge funds in our database with SIX holdings at the end of the previous quarter. Our calculations also showed that SIX isn’t among the 30 most popular stocks among hedge funds.

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 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.

D. E. Shaw

Six Flags Entertainment said its second-quarter profit increased 43%, yet missed the mark regarding Wall Street’s expectations.

The Texas-based amusement park company announced overall gain of $74.5 million, or 88 cents per share, up from $52 million, or 59 cents per share, a year sooner. Investigators surveyed by FactSet were expecting income of 93 pennies an offer.

Income rose 5% to $445.4 million, helped by a 3% expansion in participation and a 2% increase in per-capita visitor spending. Experts were forecasting income of $439 million.

Our readers will be interested to know that company director Roedel was responsible for the last major insider purchase of the company’s common stock, buying 954 shares at $62.82 in August. The shares of the company currently trade at $58.39, so the purchase wasn’t exactly profitable.

What does the smart money think about Six Flags Entertainment Corp (NYSE:SIX)?

Heading into the fourth quarter of 2018, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 56% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in SIX at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SIX_dec2018

More specifically, H Partners Management was the largest shareholder of Six Flags Entertainment Corp (NYSE:SIX), with a stake worth $471.7 million reported as of the end of September. Trailing H Partners Management was Cardinal Capital, which amassed a stake valued at $72.4 million. D E Shaw, Samlyn Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, established the biggest position in Six Flags Entertainment Corp (NYSE:SIX). D E Shaw had $59.4 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $31.3 million position during the quarter. The other funds with brand new SIX positions are Dmitry Balyasny’s Balyasny Asset Management, Jamie Mendola’s Pacific Grove Capital, and Paul Tudor Jones’ Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks similar to Six Flags Entertainment Corp (NYSE:SIX). We will take a look at Crane Co. (NYSE:CR), Foot Locker, Inc. (NYSE:FL), HubSpot Inc (NYSE:HUBS), and CIT Group Inc. (NYSE:CIT). All of these stocks’ market caps are closest to SIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CR 19 348653 0
FL 26 465132 -4
HUBS 21 440876 -1
CIT 25 899403 -1
Average 22.75 538516 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $734 million in SIX’s case. Foot Locker, Inc. (NYSE:FL) is the most popular stock in this table. On the other hand, Crane Co. (NYSE:CR) is the least popular one with only 19 bullish hedge fund positions. Six Flags Entertainment Corp (NYSE:SIX) 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. In this regard, FL might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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