Were Hedge Funds Right About Embracing Wynn Resorts, Limited (WYNN)?

In this article we will take a look at whether hedge funds think Wynn Resorts, Limited (NASDAQ:WYNN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Wynn Resorts, Limited (NASDAQ:WYNN) a buy here? Investors who are in the know were becoming hopeful. The number of long hedge fund bets moved up by 5 recently. Wynn Resorts, Limited (NASDAQ:WYNN) was in 45 hedge funds’ portfolios at the end of June. The all time high for this statistics is 50. Our calculations also showed that WYNN 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). There were 40 hedge funds in our database with WYNN holdings at the end of March.

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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. 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 to get excerpts of these letters in your inbox. Now let’s take a look at the new hedge fund action encompassing Wynn Resorts, Limited (NASDAQ:WYNN).

How have hedgies been trading Wynn Resorts, Limited (NASDAQ:WYNN)?

Heading into the third quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WYNN over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Wynn Resorts, Limited (NASDAQ:WYNN). Citadel Investment Group has a $120 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Gabriel Plotkin of Melvin Capital Management, with a $104.3 million position; 0.6% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain Ken Griffin’s Citadel Investment Group, Philippe Laffont’s Coatue Management and Robert Pohly’s Samlyn Capital. In terms of the portfolio weights assigned to each position Rip Road Capital allocated the biggest weight to Wynn Resorts, Limited (NASDAQ:WYNN), around 5.99% of its 13F portfolio. Bronson Point Partners is also relatively very bullish on the stock, earmarking 5.21 percent of its 13F equity portfolio to WYNN.

As one would reasonably expect, key hedge funds have jumped into Wynn Resorts, Limited (NASDAQ:WYNN) headfirst. Coatue Management, managed by Philippe Laffont, established the biggest position in Wynn Resorts, Limited (NASDAQ:WYNN). Coatue Management had $64.4 million invested in the company at the end of the quarter. Traci Lerner’s Chescapmanager LLC also made a $17.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Dennis Goldstein’s Rip Road Capital, Andrew Kurita’s Kettle Hill Capital Management, and Eduardo Abush’s Waterfront Capital Partners.

Let’s now review 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 Guardant Health, Inc. (NASDAQ:GH), Graco Inc. (NYSE:GGG), LKQ Corporation (NASDAQ:LKQ), Entegris Inc (NASDAQ:ENTG), NRG Energy Inc (NYSE:NRG), Globe Life Inc. (NYSE:GL), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market valuations are closest to WYNN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $766 million. That figure was $587 million in WYNN’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Entegris Inc (NASDAQ:ENTG) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Wynn Resorts, Limited (NASDAQ:WYNN) is more popular among hedge funds. Our overall hedge fund sentiment score for WYNN is 87. 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 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Unfortunately WYNN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WYNN were disappointed as the stock returned 2.8% since the end of the second quarter (through 10/23) 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 most of these stocks already outperformed the market in 2020.

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