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How Did Six Flags Entertainment Corp (SIX) Compare Against Top Hedge Fund Stocks in 2019?

Reymerlyn Martin

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Six Flags Entertainment Corp (NYSE:SIX).

Six Flags Entertainment Corp (NYSE:SIX) has seen an increase in hedge fund interest lately. Our calculations also showed that SIX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_673876" align="aligncenter" width="1613"] John Overdeck of Two Sigma Advisors[/caption]

John Overdeck of Two Sigma

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we're going to take a peek at the recent hedge fund action surrounding Six Flags Entertainment Corp (NYSE:SIX).

What does smart money think about Six Flags Entertainment Corp (NYSE:SIX)?

Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in SIX over the last 17 quarters. 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 $240.3 million worth of stock at the end of September. It was followed by Cardinal Capital with a $97.2 million position. Other investors bullish on the company included Two Sigma Advisors, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position H Partners Management allocated the biggest weight to Six Flags Entertainment Corp (NYSE:SIX), around 28.01% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, designating 6.54 percent of its 13F equity portfolio to SIX.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. SG Capital Management, managed by Ken Grossman and Glen Schneider, assembled the most outsized position in Six Flags Entertainment Corp (NYSE:SIX). SG Capital Management had $7.8 million invested in the company at the end of the quarter. Elise Di Vincenzo Crumbine's Stormborn Capital Management also initiated a $5.6 million position during the quarter. The following funds were also among the new SIX investors: Israel Englander's Millennium Management, Renaissance Technologies, and Robert Pohly's Samlyn Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Six Flags Entertainment Corp (NYSE:SIX) but similarly valued. We will take a look at LG Display Co Ltd. (NYSE:LPL), Deckers Outdoor Corp (NYSE:DECK), Wyndham Destinations, Inc. (NYSE:WYND), and Perspecta Inc. (NYSE:PRSP). All of these stocks' market caps are similar to SIX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPL,3,9362,0 DECK,26,415436,1 WYND,21,521654,-1 PRSP,40,719169,0 Average,22.5,416405,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $416 million. That figure was $639 million in SIX's case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 3 bullish hedge fund positions. Six Flags Entertainment Corp (NYSE:SIX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SIX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SIX were disappointed as the stock returned -13.7% in 2019 and trailed 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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