"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Boyd Gaming Corporation (NYSE:BYD) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Boyd Gaming Corporation (NYSE:BYD) investors should be aware of a decrease in support from the world's most elite money managers lately. BYD was in 28 hedge funds' portfolios at the end of March. There were 30 hedge funds in our database with BYD positions at the end of the previous quarter. Our calculations also showed that BYD isn't among the 30 most popular stocks among hedge funds.
According to most stock holders, hedge funds are perceived as underperforming, old investment vehicles of years past. While there are greater than 8000 funds with their doors open today, We choose to focus on the moguls of this group, approximately 750 funds. Most estimates calculate that this group of people preside over most of the hedge fund industry's total asset base, and by tracking their first-class equity investments, Insider Monkey has formulated numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
[caption id="attachment_747408" align="aligncenter" width="473"] Paul Reeder of PAR Capital[/caption]
Let's take a look at the fresh hedge fund action regarding Boyd Gaming Corporation (NYSE:BYD).
Hedge fund activity in Boyd Gaming Corporation (NYSE:BYD)
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BYD over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Valinor Management, managed by David Gallo, holds the number one position in Boyd Gaming Corporation (NYSE:BYD). Valinor Management has a $73 million position in the stock, comprising 3.8% of its 13F portfolio. On Valinor Management's heels is PAR Capital Management, managed by Paul Reeder and Edward Shapiro, which holds a $60 million position; 1.1% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Jacob Doft's Highline Capital Management, Mario Gabelli's GAMCO Investors and Daniel Lascano's Lomas Capital Management.
Because Boyd Gaming Corporation (NYSE:BYD) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who sold off their positions entirely last quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP sold off the biggest investment of the 700 funds watched by Insider Monkey, comprising close to $22.3 million in call options, and Alexander Mitchell's Scopus Asset Management was right behind this move, as the fund sold off about $20.8 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Boyd Gaming Corporation (NYSE:BYD). We will take a look at Moog Inc (NYSE:MOG), Kennametal Inc. (NYSE:KMT), Q2 Holdings Inc (NYSE:QTWO), and Red Rock Resorts, Inc. (NASDAQ:RRR). This group of stocks' market values are closest to BYD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MOG,17,90968,4 KMT,20,271144,-1 QTWO,15,67077,3 RRR,17,377954,0 Average,17.25,201786,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $404 million in BYD's case. Kennametal Inc. (NYSE:KMT) is the most popular stock in this table. On the other hand Q2 Holdings Inc (NYSE:QTWO) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Boyd Gaming Corporation (NYSE:BYD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately BYD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BYD were disappointed as the stock returned -11.4% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.