Before we spend days researching a stock idea we'd like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Vail Resorts, Inc. (NYSE:MTN).
Vail Resorts, Inc. (NYSE:MTN) investors should be aware of an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that mtn isn't among the 30 most popular stocks among hedge funds.
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.
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
Let's take a look at the latest hedge fund action encompassing Vail Resorts, Inc. (NYSE:MTN).
How have hedgies been trading Vail Resorts, Inc. (NYSE:MTN)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in MTN a year ago. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Diamond Hill Capital was the largest shareholder of Vail Resorts, Inc. (NYSE:MTN), with a stake worth $109.1 million reported as of the end of March. Trailing Diamond Hill Capital was Select Equity Group, which amassed a stake valued at $77.1 million. Marshall Wace LLP, ThornTree Capital Partners, and Land & Buildings Investment Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Select Equity Group, managed by Robert Joseph Caruso, assembled the most outsized position in Vail Resorts, Inc. (NYSE:MTN). Select Equity Group had $77.1 million invested in the company at the end of the quarter. Mark Moore's ThornTree Capital Partners also made a $20.8 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, John Overdeck and David Siegel's Two Sigma Advisors, and Yen Liow's Aravt Global.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Vail Resorts, Inc. (NYSE:MTN) but similarly valued. These stocks are Westlake Chemical Corporation (NYSE:WLK), Cognex Corporation (NASDAQ:CGNX), Snap-on Incorporated (NYSE:SNA), and Albemarle Corporation (NYSE:ALB). This group of stocks' market valuations match MTN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLK,26,364816,2 CGNX,13,230572,0 SNA,25,498590,0 ALB,25,186420,-3 Average,22.25,320100,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $380 million in MTN's case. Westlake Chemical Corporation (NYSE:WLK) is the most popular stock in this table. On the other hand Cognex Corporation (NASDAQ:CGNX) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Vail Resorts, Inc. (NYSE:MTN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MTN, though not to the same extent, as the stock returned -0.9% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.