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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Six Flags Entertainment Corp (NYSE:SIX).
Is SIX stock a buy or sell? Six Flags Entertainment Corp (NYSE:SIX) investors should be aware of an increase in enthusiasm from smart money lately. Six Flags Entertainment Corp (NYSE:SIX) was in 41 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SIX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
To the average investor there are numerous formulas market participants employ to analyze publicly traded companies. A pair of the less utilized formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the market by a solid margin (see the details here).
Robert Pohly of Samlyn Capital
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 10 best battery stocks to buy 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 we're going to take a peek at the recent hedge fund action surrounding Six Flags Entertainment Corp (NYSE:SIX).
Do Hedge Funds Think SIX Is A Good Stock To Buy Now?
At Q4's end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the third quarter of 2020. By comparison, 38 hedge funds held shares or bullish call options in SIX a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, H Partners Management was the largest shareholder of Six Flags Entertainment Corp (NYSE:SIX), with a stake worth $266 million reported as of the end of December. Trailing H Partners Management was Samlyn Capital, which amassed a stake valued at $141.6 million. Thunderbird Partners, Jericho Capital Asset Management, and EMS Capital 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 Altai Capital allocated the biggest weight to Six Flags Entertainment Corp (NYSE:SIX), around 67.94% of its 13F portfolio. H Partners Management is also relatively very bullish on the stock, designating 32.34 percent of its 13F equity portfolio to SIX.
As aggregate interest increased, specific money managers were breaking ground themselves. Maple Rock Capital, managed by Len Kipp and Xavier Majic, created the largest position in Six Flags Entertainment Corp (NYSE:SIX). Maple Rock Capital had $22.8 million invested in the company at the end of the quarter. Chuck Royce's Royce & Associates also made a $13 million investment in the stock during the quarter. The following funds were also among the new SIX investors: Dipak Patel's Alight Capital, Felix Wai's Zeno Research, and John Overdeck and David Siegel's Two Sigma Advisors.
Let's check out hedge fund activity in other stocks similar to Six Flags Entertainment Corp (NYSE:SIX). These stocks are Energizer Holdings, Inc. (NYSE:ENR), Mercury General Corporation (NYSE:MCY), NuVasive, Inc. (NASDAQ:NUVA), PJT Partners Inc (NYSE:PJT), 2U Inc (NASDAQ:TWOU), Apple Hospitality REIT Inc (NYSE:APLE), and ExlService Holdings, Inc. (NASDAQ:EXLS). This group of stocks' market valuations match SIX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ENR,26,170004,-2 MCY,18,159104,-3 NUVA,25,504270,-1 PJT,22,87241,6 TWOU,22,856960,-3 APLE,16,136106,2 EXLS,16,52895,-2 Average,20.7,280940,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $942 million in SIX's case. Energizer Holdings, Inc. (NYSE:ENR) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Six Flags Entertainment Corp (NYSE:SIX) is more popular among hedge funds. Our overall hedge fund sentiment score for SIX is 89. 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 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on SIX as the stock returned 43.4% since the end of December (through 3/19) 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.