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

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Wynn Resorts, Limited (NASDAQ:WYNN) based on that data and determine whether they were really smart about the stock.

Wynn Resorts, Limited (NASDAQ:WYNN) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. WYNN was in 40 hedge funds’ portfolios at the end of March. There were 44 hedge funds in our database with WYNN positions at the end of the previous quarter. Our calculations also showed that WYNN isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Lowenstein Kensico Capital

Michael Lowenstein of Kensico Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s go over the fresh hedge fund action surrounding Wynn Resorts, Limited (NASDAQ:WYNN).

Hedge fund activity in Wynn Resorts, Limited (NASDAQ:WYNN)

At Q1’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WYNN over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Melvin Capital Management was the largest shareholder of Wynn Resorts, Limited (NASDAQ:WYNN), with a stake worth $97.7 million reported as of the end of September. Trailing Melvin Capital Management was Citadel Investment Group, which amassed a stake valued at $73.7 million. Eminence Capital, Point72 Asset Management, and OZ 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 Columbus Hill Capital Management allocated the biggest weight to Wynn Resorts, Limited (NASDAQ:WYNN), around 3.75% of its 13F portfolio. Alden Global Capital is also relatively very bullish on the stock, earmarking 3.71 percent of its 13F equity portfolio to WYNN.

Judging by the fact that Wynn Resorts, Limited (NASDAQ:WYNN) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds who were dropping their positions entirely by the end of the first quarter. It’s worth mentioning that John Armitage’s Egerton Capital Limited dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $138.7 million in stock. Jack Woodruff’s fund, Candlestick Capital Management, also dropped its stock, about $27.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Wynn Resorts, Limited (NASDAQ:WYNN). These stocks are Advance Auto Parts, Inc. (NYSE:AAP), Aspen Technology, Inc. (NASDAQ:AZPN), Regency Centers Corp (NASDAQ:REG), and AptarGroup, Inc. (NYSE:ATR). This group of stocks’ market caps are similar to WYNN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAP 38 839686 -4
AZPN 20 736673 -17
REG 18 167065 2
ATR 20 156311 -5
Average 24 474934 -6

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $475 million. That figure was $403 million in WYNN’s case. Advance Auto Parts, Inc. (NYSE:AAP) is the most popular stock in this table. On the other hand Regency Centers Corp (NASDAQ:REG) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Wynn Resorts, Limited (NASDAQ:WYNN) is more popular among hedge funds. 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on WYNN, though not to the same extent, as the stock returned 23.8% in Q2 and outperformed the market as well.

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