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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Melco Resorts & Entertainment Limited (NASDAQ:MLCO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is MLCO a good stock to buy? Melco Resorts & Entertainment Limited (NASDAQ:MLCO) has seen an increase in enthusiasm from smart money of late. Melco Resorts & Entertainment Limited (NASDAQ:MLCO) was in 34 hedge funds' portfolios at the end of September. The all time high for this statistic is 35. Our calculations also showed that MLCO isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
If you'd ask most market participants, hedge funds are viewed as worthless, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, We hone in on the crème de la crème of this group, about 850 funds. It is estimated that this group of investors administer bulk of the hedge fund industry's total asset base, and by tracking their inimitable equity investments, Insider Monkey has brought to light several investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Bruce Kovner of Caxton Associates LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's take a look at the key hedge fund action encompassing Melco Resorts & Entertainment Limited (NASDAQ:MLCO).
Do Hedge Funds Think MLCO Is A Good Stock To Buy Now?
At third quarter's end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MLCO over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Broad Peak Investment Holdings, managed by Hyder Ahmad, holds the number one position in Melco Resorts & Entertainment Limited (NASDAQ:MLCO). Broad Peak Investment Holdings has a $103.6 million position in the stock, comprising 7.2% of its 13F portfolio. The second largest stake is held by Tremblant Capital, led by Brett Barakett, holding a $80.9 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Brian J. Higgins's King Street Capital, Ricky Sandler's Eminence Capital and Eashwar Krishnan's Tybourne Capital Management. In terms of the portfolio weights assigned to each position Brightlight Capital allocated the biggest weight to Melco Resorts & Entertainment Limited (NASDAQ:MLCO), around 10.6% of its 13F portfolio. King Street Capital is also relatively very bullish on the stock, earmarking 7.78 percent of its 13F equity portfolio to MLCO.
Now, specific money managers were leading the bulls' herd. Eminence Capital, managed by Ricky Sandler, established the most valuable position in Melco Resorts & Entertainment Limited (NASDAQ:MLCO). Eminence Capital had $72.3 million invested in the company at the end of the quarter. Eashwar Krishnan's Tybourne Capital Management also made a $68.3 million investment in the stock during the quarter. The following funds were also among the new MLCO investors: Joseph Samuels's Islet Management, Bruce Kovner's Caxton Associates LP, and Leon Shaulov's Maplelane Capital.
Let's also examine hedge fund activity in other stocks similar to Melco Resorts & Entertainment Limited (NASDAQ:MLCO). These stocks are Jazz Pharmaceuticals Plc (NASDAQ:JAZZ), Everest Re Group Ltd (NYSE:RE), Royal Gold, Inc (NASDAQ:RGLD), OneConnect Financial Technology Co., Ltd. (NYSE:OCFT), Bentley Systems, Incorporated (NASDAQ:BSY), Nikola Corporation (NASDAQ:NKLA), and Floor & Decor Holdings, Inc. (NYSE:FND). This group of stocks' market valuations resemble MLCO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JAZZ,28,1259384,-6 RE,36,526484,7 RGLD,30,352094,3 OCFT,11,47483,6 BSY,19,60746,19 NKLA,17,199530,-12 FND,42,942350,-2 Average,26.1,484010,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $484 million. That figure was $824 million in MLCO's case. Floor & Decor Holdings, Inc. (NYSE:FND) is the most popular stock in this table. On the other hand OneConnect Financial Technology Co., Ltd. (NYSE:OCFT) is the least popular one with only 11 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 overall hedge fund sentiment score for MLCO is 73.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on MLCO as the stock returned 13.9% since the end of Q3 (through 12/18) 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.