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In this article we are going to use hedge fund sentiment as a tool and determine whether Caesars Entertainment Inc. (NASDAQ:CZR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Caesars Entertainment Inc. (NASDAQ:CZR) a bargain? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund bets improved by 5 recently. Caesars Entertainment Inc. (NASDAQ:CZR) was in 76 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 74. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CZR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 71 hedge funds in our database with CZR positions at the end of the fourth quarter.
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Robert Pohly of Samlyn Capital
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Do Hedge Funds Think CZR Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 76 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 39 hedge funds with a bullish position in CZR a year ago. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Samlyn Capital, managed by Robert Pohly, holds the largest position in Caesars Entertainment Inc. (NASDAQ:CZR). Samlyn Capital has a $116.8 million position in the stock, comprising 1.6% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $94.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism include Josh Resnick's Jericho Capital Asset Management, Jeffrey Gates's Gates Capital Management and Gaurav Kapadia's XN Exponent Advisors. In terms of the portfolio weights assigned to each position Lafitte Capital Management allocated the biggest weight to Caesars Entertainment Inc. (NASDAQ:CZR), around 35.06% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, designating 9.47 percent of its 13F equity portfolio to CZR.
As one would reasonably expect, key money managers have jumped into Caesars Entertainment Inc. (NASDAQ:CZR) headfirst. XN Exponent Advisors, managed by Gaurav Kapadia, created the most outsized position in Caesars Entertainment Inc. (NASDAQ:CZR). XN Exponent Advisors had $81.8 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also made a $29.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Phill Gross and Robert Atchinson's Adage Capital Management, Gregg Moskowitz's Interval Partners, and Anthony Joseph Vaccarino's North Fourth Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Caesars Entertainment Inc. (NASDAQ:CZR) but similarly valued. We will take a look at Affirm Holdings, Inc. (NASDAQ:AFRM), Expeditors International of Washington (NASDAQ:EXPD), Rogers Communications Inc. (NYSE:RCI), Invitation Homes Inc. (NYSE:INVH), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), Catalent Inc (NYSE:CTLT), and The AES Corporation (NYSE:AES). All of these stocks' market caps are similar to CZR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AFRM,32,582516,32 EXPD,21,440396,-4 RCI,18,289168,3 INVH,28,1174443,1 SSNC,54,2671021,5 CTLT,29,1016499,-6 AES,51,1541608,13 Average,33.3,1102236,6.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $1102 million. That figure was $1520 million in CZR's case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Rogers Communications Inc. (NYSE:RCI) is the least popular one with only 18 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 90. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on CZR as the stock returned 26.1% since the end of March (through 6/11) 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.