Were Hedge Funds Right About Loading Up On Six Flags Entertainment Corp (SIX)?

In this article you are going to find out whether hedge funds think Six Flags Entertainment Corp (NYSE:SIX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Six Flags Entertainment Corp (NYSE:SIX) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 41. SIX investors should be aware of an increase in enthusiasm from smart money in recent months. There were 30 hedge funds in our database with SIX positions at the end of the first quarter. Our calculations also showed that SIX 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. 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. With all of this in mind let’s take a look at the recent hedge fund action surrounding Six Flags Entertainment Corp (NYSE:SIX).

Hedge fund activity in Six Flags Entertainment Corp (NYSE:SIX)

At the end of the second quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in SIX over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, H Partners Management was the largest shareholder of Six Flags Entertainment Corp (NYSE:SIX), with a stake worth $149.8 million reported as of the end of June. Trailing H Partners Management was Samlyn Capital, which amassed a stake valued at $41.4 million. Jericho Capital Asset Management, Arrowstreet Capital, and Impala Asset 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 H Partners Management allocated the biggest weight to Six Flags Entertainment Corp (NYSE:SIX), around 33.65% of its 13F portfolio. Altai Capital is also relatively very bullish on the stock, designating 14.67 percent of its 13F equity portfolio to SIX.

As industrywide interest jumped, key money managers have jumped into Six Flags Entertainment Corp (NYSE:SIX) headfirst. Samlyn Capital, managed by Robert Pohly, created the largest position in Six Flags Entertainment Corp (NYSE:SIX). Samlyn Capital had $41.4 million invested in the company at the end of the quarter. Josh Resnick’s Jericho Capital Asset Management also initiated a $40.1 million position during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Stuart J. Zimmer’s Zimmer Partners, and Edmond M. Safra’s EMS Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Six Flags Entertainment Corp (NYSE:SIX) but similarly valued. We will take a look at Epizyme Inc (NASDAQ:EPZM), Eldorado Gold Corp (NYSE:EGO), Sogou Inc. (NYSE:SOGO), JELD-WEN Holding, Inc. (NYSE:JELD), CNX Resources Corporation (NYSE:CNX), Adtalem Global Education Inc. (NYSE:ATGE), and Columbia Financial, Inc. (NASDAQ:CLBK). This group of stocks’ market valuations resemble SIX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPZM 23 317359 1
EGO 12 224197 -2
SOGO 5 15881 -1
JELD 15 193669 -5
CNX 28 495530 4
ATGE 22 317607 10
CLBK 10 37574 0
Average 16.4 228831 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $229 million. That figure was $494 million in SIX’s case. CNX Resources Corporation (NYSE:CNX) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Six Flags Entertainment Corp (NYSE:SIX) is more popular among hedge funds. Our overall hedge fund sentiment score for SIX is 82.1. 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 returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on SIX as the stock returned 12.5% since the end of June (through 10/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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