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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Caesars Entertainment Inc. (NASDAQ:CZR) based on those filings.
Is Caesars Entertainment (CZR) stock a buy or sell? Money managers were reducing their bets on the stock. The number of bullish hedge fund positions were trimmed by 3 recently. Caesars Entertainment Inc. (NASDAQ:CZR) was in 71 hedge funds' portfolios at the end of December. The all time high for this statistic is 74. Our calculations also showed that CZR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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).
Roberto Mignone of Bridger Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 best cheap stocks to buy now to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). With all of this in mind we're going to analyze the fresh hedge fund action surrounding Caesars Entertainment Inc. (NASDAQ:CZR).
Do Hedge Funds Think CZR Is A Good Stock To Buy Now?
At the end of December, a total of 71 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. By comparison, 46 hedge funds held shares or bullish call options in CZR 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.
Among these funds, Canyon Capital Advisors held the most valuable stake in Caesars Entertainment Inc. (NASDAQ:CZR), which was worth $225.1 million at the end of the fourth quarter. On the second spot was Jericho Capital Asset Management which amassed $91.7 million worth of shares. Samlyn Capital, Bridger Management, and Light Street Capital 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 Lafitte Capital Management allocated the biggest weight to Caesars Entertainment Inc. (NASDAQ:CZR), around 35.58% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, dishing out 13.59 percent of its 13F equity portfolio to CZR.
Seeing as Caesars Entertainment Inc. (NASDAQ:CZR) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there were a few fund managers that elected to cut their positions entirely in the fourth quarter. Interestingly, Dan Loeb's Third Point dropped the biggest stake of the 750 funds watched by Insider Monkey, comprising about $56.1 million in stock, and Robert Emil Zoellner's Alpine Associates was right behind this move, as the fund said goodbye to about $43.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds in the fourth quarter.
Let's also examine hedge fund activity in other stocks similar to Caesars Entertainment Inc. (NASDAQ:CZR). These stocks are CarMax Inc (NYSE:KMX), Shinhan Financial Group Co., Ltd. (NYSE:SHG), Waters Corporation (NYSE:WAT), Hewlett Packard Enterprise Company (NYSE:HPE), Citizens Financial Group Inc (NYSE:CFG), 10x Genomics, Inc. (NASDAQ:TXG), and Celanese Corporation (NYSE:CE). This group of stocks' market valuations resemble CZR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KMX,46,1485714,-8 SHG,7,27734,3 WAT,30,1993478,-2 HPE,30,923308,-4 CFG,38,453830,2 TXG,33,745283,2 CE,33,997491,7 Average,31,946691,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $947 million. That figure was $1439 million in CZR's case. CarMax Inc (NYSE:KMX) is the most popular stock in this table. On the other hand Shinhan Financial Group Co., Ltd. (NYSE:SHG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Caesars Entertainment Inc. (NASDAQ:CZR) is more popular among hedge funds. Our overall hedge fund sentiment score for CZR is 80.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7% in 2021 through March 12th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on CZR as the stock returned 35.5% since the end of December (through 3/12) 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.