At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Cedar Fair, L.P. (NYSE:FUN) makes for a good investment right now.
Cedar Fair, L.P. (NYSE:FUN) has experienced an increase in support from the world's most elite money managers lately. Our calculations also showed that FUN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_746893" align="alignnone" width="1613"] Paul Marshall of Marshall Wace[/caption]
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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the key hedge fund action encompassing Cedar Fair, L.P. (NYSE:FUN).
What have hedge funds been doing with Cedar Fair, L.P. (NYSE:FUN)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 63% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FUN over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of Cedar Fair, L.P. (NYSE:FUN), with a stake worth $31 million reported as of the end of September. Trailing Arrowstreet Capital was Marshall Wace, which amassed a stake valued at $25.1 million. Intrinsic Edge Capital, GLG Partners, and Miller Value Partners 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 Intrinsic Edge Capital allocated the biggest weight to Cedar Fair, L.P. (NYSE:FUN), around 1.55% of its 13F portfolio. Miller Value Partners is also relatively very bullish on the stock, setting aside 0.24 percent of its 13F equity portfolio to FUN.
Consequently, key money managers have jumped into Cedar Fair, L.P. (NYSE:FUN) headfirst. Coatue Management, managed by Philippe Laffont, initiated the most outsized position in Cedar Fair, L.P. (NYSE:FUN). Coatue Management had $4.1 million invested in the company at the end of the quarter. Robert Bishop's Impala Asset Management also initiated a $2.1 million position during the quarter. The following funds were also among the new FUN investors: Richard Driehaus's Driehaus Capital, Matthew Hulsizer's PEAK6 Capital Management, and Jonathan Soros's JS Capital.
Let's check out hedge fund activity in other stocks similar to Cedar Fair, L.P. (NYSE:FUN). We will take a look at ICU Medical, Inc. (NASDAQ:ICUI), NuVasive, Inc. (NASDAQ:NUVA), Companhia Paranaense de Energia (NYSE:ELP), and Physicians Realty Trust (NYSE:DOC). This group of stocks' market caps resemble FUN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ICUI,15,234605,0 NUVA,21,253261,-3 ELP,8,61388,-1 DOC,14,67660,2 Average,14.5,154229,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $154 million. That figure was $100 million in FUN's case. NuVasive, Inc. (NASDAQ:NUVA) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia (NYSE:ELP) is the least popular one with only 8 bullish hedge fund positions. Cedar Fair, L.P. (NYSE:FUN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately FUN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); FUN investors were disappointed as the stock returned -4.3% during the first two months of the fourth quarter and underperformed 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.