Does Studio City International Holdings Limited (NYSE:MSC) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.
Hedge fund interest in Studio City International Holdings Limited (NYSE:MSC) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MSC to other stocks including IAMGOLD Corporation (NYSE:IAG), Visteon Corp (NASDAQ:VC), and Southwestern Energy Company (NYSE:SWN) to get a better sense of its popularity. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
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 check out the new hedge fund action encompassing Studio City International Holdings Limited (NYSE:MSC).
What have hedge funds been doing with Studio City International Holdings Limited (NYSE:MSC)?
At Q2's end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in MSC a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Silver Point Capital, managed by Edward A. Mule, holds the largest position in Studio City International Holdings Limited (NYSE:MSC). Silver Point Capital has a $209.5 million position in the stock, comprising 26% of its 13F portfolio. On Silver Point Capital's heels is Redwood Capital Management, led by Jonathan Kolatch, holding a $24.2 million position; 1.6% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Jody LaNasa's Serengeti Asset Management, Israel Englander's Millennium Management and .
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Springbok Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Serengeti Asset Management).
Let's now review hedge fund activity in other stocks similar to Studio City International Holdings Limited (NYSE:MSC). These stocks are IAMGOLD Corporation (NYSE:IAG), Visteon Corp (NASDAQ:VC), Southwestern Energy Company (NYSE:SWN), and FBL Financial Group, Inc. (NYSE:FFG). All of these stocks' market caps are closest to MSC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IAG,15,150001,2 VC,17,281647,-4 SWN,18,256829,-6 FFG,7,12886,0 Average,14.25,175341,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $175 million. That figure was $238 million in MSC's case. Southwestern Energy Company (NYSE:SWN) is the most popular stock in this table. On the other hand FBL Financial Group, Inc. (NYSE:FFG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Studio City International Holdings Limited (NYSE:MSC) is even less popular than FFG. Hedge funds dodged a bullet by taking a bearish stance towards MSC. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MSC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MSC investors were disappointed as the stock returned 1.4% 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 so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.