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Is MGM Resorts International (MGM) Going to Burn These Hedge Funds?

·5 min read

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on MGM Resorts International (NYSE:MGM).

Is MGM Resorts International (NYSE:MGM) a marvelous investment right now? Investors who are in the know were becoming more confident. The number of long hedge fund bets moved up by 13 lately. MGM Resorts International (NYSE:MGM) was in 57 hedge funds' portfolios at the end of March. The all time high for this statistic is 67. Our calculations also showed that MGM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 44 hedge funds in our database with MGM positions at the end of the fourth quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Keith Meister of Corvex Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to check out the key hedge fund action surrounding MGM Resorts International (NYSE:MGM).

Do Hedge Funds Think MGM Is A Good Stock To Buy Now?

At the end of March, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in MGM over the last 23 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Corvex Capital was the largest shareholder of MGM Resorts International (NYSE:MGM), with a stake worth $595.4 million reported as of the end of March. Trailing Corvex Capital was Orbis Investment Management, which amassed a stake valued at $527.2 million. SRS Investment Management, Southeastern Asset Management, and Steadfast Capital Management 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 Corvex Capital allocated the biggest weight to MGM Resorts International (NYSE:MGM), around 29.3% of its 13F portfolio. SRS Investment Management is also relatively very bullish on the stock, earmarking 6.33 percent of its 13F equity portfolio to MGM.

As industrywide interest jumped, key money managers were breaking ground themselves. Atreides Management, managed by Gavin Baker, assembled the biggest position in MGM Resorts International (NYSE:MGM). Atreides Management had $38.6 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers's Castle Hook Partners also made a $37.2 million investment in the stock during the quarter. The following funds were also among the new MGM investors: Ben Gambill's Tiger Eye Capital, Gregg Moskowitz's Interval Partners, and Pasco Alfaro and Richard Turnure's Miura Global Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as MGM Resorts International (NYSE:MGM) but similarly valued. We will take a look at Farfetch Limited (NYSE:FTCH), Citizens Financial Group Inc (NYSE:CFG), Ubiquiti Inc. (NYSE:UI), CGI Inc. (NYSE:GIB), MarketAxess Holdings Inc. (NASDAQ:MKTX), Coupa Software Incorporated (NASDAQ:COUP), and Darden Restaurants, Inc. (NYSE:DRI). This group of stocks' market values are closest to MGM's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTCH,57,3095281,10 CFG,41,579075,3 UI,19,278681,0 GIB,15,187732,0 MKTX,34,672097,0 COUP,50,3702472,-12 DRI,49,1315631,7 Average,37.9,1404424,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1404 million. That figure was $2716 million in MGM's case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 15 bullish hedge fund positions. MGM Resorts International (NYSE:MGM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MGM is 85.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on MGM as the stock returned 13.7% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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