The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Melco Resorts & Entertainment Limited (NASDAQ:MLCO).
Melco Resorts & Entertainment Limited (NASDAQ:MLCO) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that MLCO 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_339612" align="aligncenter" width="400"] Kerr Neilson of Platinum Asset Management[/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 as well as this tiny lithium play. 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. Now we're going to take a look at the fresh hedge fund action regarding Melco Resorts & Entertainment Limited (NASDAQ:MLCO).
How are hedge funds trading Melco Resorts & Entertainment Limited (NASDAQ:MLCO)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2019. On the other hand, there were a total of 22 hedge funds with a bullish position in MLCO a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Kerr Neilson's Platinum Asset Management has the number one position in Melco Resorts & Entertainment Limited (NASDAQ:MLCO), worth close to $58.7 million, corresponding to 1.5% of its total 13F portfolio. The second most bullish fund manager is Broad Peak Investment Holdings, led by Hyder Ahmad, holding a $55.9 million position; 6.5% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish comprise Brett Barakett's Tremblant Capital, Renaissance Technologies and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Brightlight Capital allocated the biggest weight to Melco Resorts & Entertainment Limited (NASDAQ:MLCO), around 8.83% of its 13F portfolio. Broad Peak Investment Holdings is also relatively very bullish on the stock, setting aside 6.5 percent of its 13F equity portfolio to MLCO.
Due to the fact that Melco Resorts & Entertainment Limited (NASDAQ:MLCO) has experienced a decline in interest from hedge fund managers, it's safe to say that there is a sect of hedgies that elected to cut their positions entirely heading into Q4. Intriguingly, Steve Cohen's Point72 Asset Management cut the biggest investment of all the hedgies watched by Insider Monkey, comprising about $27.1 million in stock. David Kowitz and Sheldon Kasowitz's fund, Indus Capital, also said goodbye to its stock, about $14.3 million worth. These transactions are important to note, as total hedge fund interest fell by 7 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Melco Resorts & Entertainment Limited (NASDAQ:MLCO) but similarly valued. We will take a look at The Scotts Miracle-Gro Company (NYSE:SMG), Pegasystems Inc. (NASDAQ:PEGA), Huaneng Power International Inc (NYSE:HNP), and Commerce Bancshares, Inc. (NASDAQ:CBSH). This group of stocks' market values are closest to MLCO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMG,28,256079,-3 PEGA,33,1023977,8 HNP,3,2437,0 CBSH,15,44791,5 Average,19.75,331821,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $332 million. That figure was $482 million in MLCO's case. Pegasystems Inc. (NASDAQ:PEGA) is the most popular stock in this table. On the other hand Huaneng Power International Inc (NYSE:HNP) is the least popular one with only 3 bullish hedge fund positions. Melco Resorts & Entertainment Limited (NASDAQ:MLCO) is not the most popular stock in this group but hedge fund interest is still above average. 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 still beat the market by 13.2 percentage points. Hedge funds were also right about betting on MLCO as the stock returned 29.3% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.