We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Eldorado Resorts Inc (NYSE:ERI).
Eldorado Resorts Inc (NYSE:ERI) was in 44 hedge funds' portfolios at the end of September. ERI shareholders have witnessed an increase in activity from the world's largest hedge funds of late. There were 37 hedge funds in our database with ERI holdings at the end of the previous quarter. Our calculations also showed that ERI isn't among the 30 most popular stocks among hedge funds.
If you'd ask most investors, hedge funds are viewed as unimportant, old investment tools of yesteryear. While there are more than 8000 funds in operation at the moment, Our experts hone in on the elite of this group, about 750 funds. These hedge fund managers administer bulk of all hedge funds' total capital, and by watching their highest performing equity investments, Insider Monkey has found numerous investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_324853" align="aligncenter" width="450"] Joshua Friedman of Canyon Capital Advisors[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Now, we're going to analyze the recent hedge fund action regarding Eldorado Resorts Inc (NYSE:ERI) which owns 26 properties across the country (see best places to visit in November).
What have hedge funds been doing with Eldorado Resorts Inc (NYSE:ERI)?
Heading into the fourth quarter of 2019, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in ERI a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, HG Vora Capital Management was the largest shareholder of Eldorado Resorts Inc (NYSE:ERI), with a stake worth $229.3 million reported as of the end of September. Trailing HG Vora Capital Management was Canyon Capital Advisors, which amassed a stake valued at $204.5 million. Park West Asset Management, Silver Point Capital, and Lafitte Capital Management 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 Lafitte Capital Management allocated the biggest weight to Eldorado Resorts Inc (NYSE:ERI), around 35.86% of its portfolio. HG Vora Capital Management is also relatively very bullish on the stock, dishing out 21.96 percent of its 13F equity portfolio to ERI.
As aggregate interest increased, key hedge funds were breaking ground themselves. Park West Asset Management, managed by Peter S. Park, assembled the most outsized call position in Eldorado Resorts Inc (NYSE:ERI). Park West Asset Management had $33.1 million invested in the company at the end of the quarter. Ken Grossman and Glen Schneider's SG Capital Management also made a $28.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Jonathan Litt's Land & Buildings Investment Management, Mark Coe's Intrinsic Edge Capital, and Daniel Lascano's Lomas Capital Management.
Let's now review hedge fund activity in other stocks similar to Eldorado Resorts Inc (NYSE:ERI). We will take a look at Cronos Group Inc. (NASDAQ:CRON), CenterState Bank Corporation (NASDAQ:CSFL), Mercury General Corporation (NYSE:MCY), and Sunstone Hotel Investors Inc (NYSE:SHO). All of these stocks' market caps match ERI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRON,11,93920,3 CSFL,12,83804,-3 MCY,20,200510,4 SHO,21,221672,0 Average,16,149977,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $1020 million in ERI's case. Sunstone Hotel Investors Inc (NYSE:SHO) is the most popular stock in this table. On the other hand Cronos Group Inc. (NASDAQ:CRON) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Eldorado Resorts Inc (NYSE:ERI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on ERI as the stock returned 32.9% during Q4 (through 11/22) 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.