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Hedge Funds Have Never Been Less Bullish On VICI Properties Inc. (VICI)

Abigail Fisher
·6 mins read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of VICI Properties Inc. (NYSE:VICI) based on that data.

VICI Properties Inc. (NYSE:VICI) was in 36 hedge funds' portfolios at the end of March. VICI investors should be aware of a decrease in activity from the world's largest hedge funds lately. There were 37 hedge funds in our database with VICI holdings at the end of the previous quarter. Our calculations also showed that VICI 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.

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 51 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

[caption id="attachment_728785" align="aligncenter" width="397"] Jeffrey Gates of Gates Capital[/caption]

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a glance at the new hedge fund action surrounding VICI Properties Inc. (NYSE:VICI).

What have hedge funds been doing with VICI Properties Inc. (NYSE:VICI)?

Heading into the second quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in VICI a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

More specifically, Canyon Capital Advisors was the largest shareholder of VICI Properties Inc. (NYSE:VICI), with a stake worth $301.1 million reported as of the end of September. Trailing Canyon Capital Advisors was Gates Capital Management, which amassed a stake valued at $89.4 million. Soros Fund Management, D E Shaw, and Eminence Capital 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 Canyon Capital Advisors allocated the biggest weight to VICI Properties Inc. (NYSE:VICI), around 10.63% of its 13F portfolio. 1060 Capital Management is also relatively very bullish on the stock, setting aside 8.34 percent of its 13F equity portfolio to VICI.

Seeing as VICI Properties Inc. (NYSE:VICI) has faced declining sentiment from hedge fund managers, it's safe to say that there were a few funds that decided to sell off their positions entirely last quarter. Interestingly, Daniel S. Och's OZ Management sold off the largest position of all the hedgies followed by Insider Monkey, comprising about $108.2 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund sold off about $34.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let's now review hedge fund activity in other stocks similar to VICI Properties Inc. (NYSE:VICI). These stocks are SVB Financial Group (NASDAQ:SIVB), Vistra Energy Corp. (NYSE:VST), CenterPoint Energy, Inc. (NYSE:CNP), and Nordson Corporation (NASDAQ:NDSN). This group of stocks' market values are similar to VICI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SIVB,30,383904,-5 VST,39,1440172,-10 CNP,32,560894,2 NDSN,22,98925,-7 Average,30.75,620974,-5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $621 million. That figure was $922 million in VICI's case. Vistra Energy Corp. (NYSE:VST) is the most popular stock in this table. On the other hand Nordson Corporation (NASDAQ:NDSN) is the least popular one with only 22 bullish hedge fund positions. VICI Properties Inc. (NYSE:VICI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately VICI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on VICI were disappointed as the stock returned 17.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

[company-follow-email id=1705696][/company-follow-email]

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

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