Were Hedge Funds Right About Piling Into Six Flags (SIX)?

In this article we are going to use hedge fund sentiment as a tool and determine whether Six Flags Entertainment Corp (NYSE:SIX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Six Flags Entertainment Corp (NYSE:SIX) a bargain? Prominent investors were getting more bullish. The number of long hedge fund positions rose by 4 lately. Six Flags Entertainment Corp (NYSE:SIX) was in 41 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SIX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 37 hedge funds in our database with SIX positions at the end of the third quarter.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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

Heading into the first quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. By comparison, 38 hedge funds held shares or bullish call options in SIX 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.

The largest stake in Six Flags Entertainment Corp (NYSE:SIX) was held by H Partners Management, which reported holding $266 million worth of stock at the end of December. It was followed by Samlyn Capital with a $141.6 million position. Other investors bullish on the company included Thunderbird Partners, Jericho Capital Asset Management, and EMS Capital. In terms of the portfolio weights assigned to each position Altai Capital allocated the biggest weight to Six Flags Entertainment Corp (NYSE:SIX), around 67.94% of its 13F portfolio. H Partners Management is also relatively very bullish on the stock, setting aside 32.34 percent of its 13F equity portfolio to SIX.

As aggregate interest increased, some big names were breaking ground themselves. Maple Rock Capital, managed by Len Kipp and Xavier Majic, established the most valuable position in Six Flags Entertainment Corp (NYSE:SIX). Maple Rock Capital had $22.8 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $13 million investment in the stock during the quarter. The following funds were also among the new SIX investors: Dipak Patel’s Alight Capital, Felix Wai’s Zeno Research, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Six Flags Entertainment Corp (NYSE:SIX) but similarly valued. These stocks are Energizer Holdings, Inc. (NYSE:ENR), Mercury General Corporation (NYSE:MCY), NuVasive, Inc. (NASDAQ:NUVA), PJT Partners Inc (NYSE:PJT), 2U Inc (NASDAQ:TWOU), Apple Hospitality REIT Inc (NYSE:APLE), and ExlService Holdings, Inc. (NASDAQ:EXLS). 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
ENR 26 170004 -2
MCY 18 159104 -3
NUVA 25 504270 -1
PJT 22 87241 6
TWOU 22 856960 -3
APLE 16 136106 2
EXLS 16 52895 -2
Average 20.7 280940 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $942 million in SIX’s case. Energizer Holdings, Inc. (NYSE:ENR) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 16 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 89. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on SIX as the stock returned 37.8% since the end of December (through 4/30) 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.