It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. 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 SeaWorld Entertainment Inc (NYSE:SEAS).
Is SeaWorld Entertainment Inc (NYSE:SEAS) a buy, sell, or hold? The best stock pickers are becoming more confident. The number of bullish hedge fund positions moved up by 5 recently. Our calculations also showed that SEAS isn't among the 30 most popular stocks among hedge funds (view video below). SEAS was in 32 hedge funds' portfolios at the end of June. There were 27 hedge funds in our database with SEAS positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are a large number of gauges shareholders can use to analyze stocks. A duo of the less utilized gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the broader indices by a solid margin (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the recent hedge fund action regarding SeaWorld Entertainment Inc (NYSE:SEAS).
How are hedge funds trading SeaWorld Entertainment Inc (NYSE:SEAS)?
Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SEAS over the last 16 quarters. 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, Hill Path Capital was the largest shareholder of SeaWorld Entertainment Inc (NYSE:SEAS), with a stake worth $843.4 million reported as of the end of March. Trailing Hill Path Capital was Renaissance Technologies, which amassed a stake valued at $56.6 million. Point72 Asset Management, Arrowstreet Capital, and Simcoe Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds have jumped into SeaWorld Entertainment Inc (NYSE:SEAS) headfirst. DSAM Partners, managed by Guy Shahar, created the most valuable position in SeaWorld Entertainment Inc (NYSE:SEAS). DSAM Partners had $26 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also made a $10.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Leon Lowenstein's Lionstone Capital Management, Charles Davidson and Joseph Jacobs's Wexford Capital, and Philippe Laffont's Coatue Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as SeaWorld Entertainment Inc (NYSE:SEAS) but similarly valued. We will take a look at Meredith Corporation (NYSE:MDP), Turquoise Hill Resources Ltd (NYSE:TRQ), Columbia Property Trust Inc (NYSE:CXP), and Hillenbrand, Inc. (NYSE:HI). This group of stocks' market valuations resemble SEAS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDP,11,271061,0 TRQ,20,666843,3 CXP,12,59497,-3 HI,18,57614,-2 Average,15.25,263754,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $1207 million in SEAS's case. Turquoise Hill Resources Ltd (NYSE:TRQ) is the most popular stock in this table. On the other hand Meredith Corporation (NYSE:MDP) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks SeaWorld Entertainment Inc (NYSE:SEAS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SEAS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SEAS were disappointed as the stock returned -15.1% during the third 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.