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We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Red Rock Resorts, Inc. (NASDAQ:RRR) based on that data.
Is RRR stock a buy? Red Rock Resorts, Inc. (NASDAQ:RRR) shareholders have witnessed a decrease in hedge fund sentiment of late. Red Rock Resorts, Inc. (NASDAQ:RRR) was in 26 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. Our calculations also showed that RRR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind let's take a look at the latest hedge fund action encompassing Red Rock Resorts, Inc. (NASDAQ:RRR).
Do Hedge Funds Think RRR Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in RRR a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Diamond Hill Capital held the most valuable stake in Red Rock Resorts, Inc. (NASDAQ:RRR), which was worth $149.9 million at the end of the fourth quarter. On the second spot was Eminence Capital which amassed $144.5 million worth of shares. Interval Partners, Arrowstreet Capital, and D E Shaw 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 Interval Partners allocated the biggest weight to Red Rock Resorts, Inc. (NASDAQ:RRR), around 3% of its 13F portfolio. Thames Capital Management is also relatively very bullish on the stock, designating 1.9 percent of its 13F equity portfolio to RRR.
Because Red Rock Resorts, Inc. (NASDAQ:RRR) has witnessed declining sentiment from the smart money, logic holds that there exists a select few hedgies who sold off their entire stakes in the fourth quarter. Intriguingly, Jody LaNasa's Serengeti Asset Management sold off the largest position of the "upper crust" of funds tracked by Insider Monkey, valued at close to $11.1 million in stock. Brad Stephens's fund, Six Columns Capital, also sold off its stock, about $6.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds in the fourth quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Red Rock Resorts, Inc. (NASDAQ:RRR) but similarly valued. We will take a look at American States Water Co (NYSE:AWR), Materialise NV (NASDAQ:MTLS), Corporate Office Properties Trust (NYSE:OFC), Sumo Logic, Inc. (NASDAQ:SUMO), Option Care Health, Inc. (NASDAQ:OPCH), Momo Inc (NASDAQ:MOMO), and GATX Corporation (NYSE:GATX). This group of stocks' market valuations match RRR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AWR,18,46182,-3 MTLS,5,467733,0 OFC,17,165147,-4 SUMO,16,213124,3 OPCH,24,247873,6 MOMO,24,342209,-6 GATX,12,177816,2 Average,16.6,237155,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $563 million in RRR's case. Option Care Health, Inc. (NASDAQ:OPCH) is the most popular stock in this table. On the other hand Materialise NV (NASDAQ:MTLS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Red Rock Resorts, Inc. (NASDAQ:RRR) is more popular among hedge funds. Our overall hedge fund sentiment score for RRR is 78. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on RRR as the stock returned 34.1% since the end of December (through 4/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.