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Hedge Funds Are Buying Monarch Casino & Resort, Inc. (MCRI)

Debasis Saha

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Monarch Casino & Resort, Inc. (NASDAQ:MCRI)?

Monarch Casino & Resort, Inc. (NASDAQ:MCRI) was in 15 hedge funds' portfolios at the end of March. MCRI has experienced an increase in hedge fund interest of late. There were 12 hedge funds in our database with MCRI holdings at the end of the previous quarter. Our calculations also showed that MCRI 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

[caption id="attachment_221556" align="aligncenter" width="400"] Richard Driehaus of Driehaus Capital[/caption]

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we're going to review the new hedge fund action regarding Monarch Casino & Resort, Inc. (NASDAQ:MCRI).

How have hedgies been trading Monarch Casino & Resort, Inc. (NASDAQ:MCRI)?

At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the fourth quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in MCRI a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is MCRI A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Peter S. Park's Park West Asset Management has the number one position in Monarch Casino & Resort, Inc. (NASDAQ:MCRI), worth close to $36.6 million, comprising 2.5% of its total 13F portfolio. On Park West Asset Management's heels is Lafitte Capital Management, managed by Bryant Regan, which holds a $9.6 million position; the fund has 21.9% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Israel Englander's Millennium Management, Mark McMeans's Brasada Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Lafitte Capital Management allocated the biggest weight to Monarch Casino & Resort, Inc. (NASDAQ:MCRI), around 21.87% of its 13F portfolio. 1060 Capital Management is also relatively very bullish on the stock, dishing out 9.41 percent of its 13F equity portfolio to MCRI.

Now, key money managers have been driving this bullishness. Venator Capital Management, managed by Brandon Osten, initiated the most outsized position in Monarch Casino & Resort, Inc. (NASDAQ:MCRI). Venator Capital Management had $2 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also made a $1 million investment in the stock during the quarter. The other funds with new positions in the stock are Brian Gustavson and Andrew Haley's 1060 Capital Management, Robert Hockett's Covalent Capital Partners, and Matthew Hulsizer's PEAK6 Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Monarch Casino & Resort, Inc. (NASDAQ:MCRI) but similarly valued. We will take a look at Seritage Growth Properties (NYSE:SRG), Gores Metropoulos, Inc. (NASDAQ:GMHI), Colony Credit Real Estate, Inc. (NYSE:CLNC), and Gladstone Commercial Corporation (NASDAQ:GOOD). All of these stocks' market caps are similar to MCRI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SRG,17,85126,2 GMHI,16,134362,-1 CLNC,11,8665,3 GOOD,8,53096,2 Average,13,70312,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $75 million in MCRI's case. Seritage Growth Properties (NYSE:SRG) is the most popular stock in this table. On the other hand Gladstone Commercial Corporation (NASDAQ:GOOD) is the least popular one with only 8 bullish hedge fund positions. Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on MCRI, though not to the same extent, as the stock returned 23.7% during the first two months and twenty five days of the second quarter and outperformed the market as well.

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

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