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Did Hedge Funds Drop The Ball On Boyd Gaming Corporation (BYD) ?

Abigail Fisher

Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Boyd Gaming Corporation (NYSE:BYD) investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months. BYD was in 30 hedge funds' portfolios at the end of December. There were 33 hedge funds in our database with BYD holdings at the end of the previous quarter. Our calculations also showed that BYD isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_375529" align="aligncenter" width="450"] Mario Gabelli of GAMCO Investors[/caption]

Mario Gabelli of GAMCO Investors

We're going to take a peek at the fresh hedge fund action encompassing Boyd Gaming Corporation (NYSE:BYD).

How are hedge funds trading Boyd Gaming Corporation (NYSE:BYD)?

At Q4's end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in BYD a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BYD_apr2019

Among these funds, PAR Capital Management held the most valuable stake in Boyd Gaming Corporation (NYSE:BYD), which was worth $120.8 million at the end of the third quarter. On the second spot was Valinor Management LLC which amassed $56.1 million worth of shares. Moreover, Highline Capital Management, GAMCO Investors, and Millennium Management were also bullish on Boyd Gaming Corporation (NYSE:BYD), allocating a large percentage of their portfolios to this stock.

Since Boyd Gaming Corporation (NYSE:BYD) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there were a few fund managers that elected to cut their full holdings by the end of the third quarter. At the top of the heap, David Tepper's Appaloosa Management LP dumped the largest position of the 700 funds watched by Insider Monkey, valued at about $45.9 million in stock. Alexander Mitchell's fund, Scopus Asset Management, also dropped its stock, about $36.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let's now review hedge fund activity in other stocks similar to Boyd Gaming Corporation (NYSE:BYD). We will take a look at Genomic Health, Inc. (NASDAQ:GHDX), CNX Resources Corporation (NYSE:CNX), First Financial Bancorp (NASDAQ:FFBC), and iRobot Corporation (NASDAQ:IRBT). All of these stocks' market caps match BYD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GHDX,24,1022530,6 CNX,23,747911,0 FFBC,6,17474,-1 IRBT,14,79814,4 Average,16.75,466932,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $467 million. That figure was $461 million in BYD's case. Genomic Health, Inc. (NASDAQ:GHDX) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Boyd Gaming Corporation (NYSE:BYD) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on BYD as the stock returned 43.8% 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.

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

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