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Was The Smart Money Right About Crowding Into VICI Properties Inc. (VICI)?

Asma UL Husna
·6 min read

In this article we will take a look at whether hedge funds think VICI Properties Inc. (NYSE:VICI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

VICI Properties Inc. (NYSE:VICI) has experienced an increase in hedge fund sentiment of late. VICI Properties Inc. (NYSE:VICI) was in 51 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 59. There were 36 hedge funds in our database with VICI holdings at the end of March. Our calculations also showed that VICI isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Gates of Gates Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a gander at the key hedge fund action encompassing VICI Properties Inc. (NYSE:VICI).

Hedge fund activity in VICI Properties Inc. (NYSE:VICI)

At the end of the second quarter, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 42% from the previous quarter. On the other hand, there were a total of 59 hedge funds with a bullish position in VICI a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

The largest stake in VICI Properties Inc. (NYSE:VICI) was held by Canyon Capital Advisors, which reported holding $469.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $153.8 million position. Other investors bullish on the company included Gates Capital Management, King Street Capital, and Soros Fund Management. In terms of the portfolio weights assigned to each position 1060 Capital Management allocated the biggest weight to VICI Properties Inc. (NYSE:VICI), around 53.57% of its 13F portfolio. Canyon Capital Advisors is also relatively very bullish on the stock, dishing out 15.71 percent of its 13F equity portfolio to VICI.

As aggregate interest increased, key hedge funds have jumped into VICI Properties Inc. (NYSE:VICI) headfirst. Parsifal Capital Management, managed by David Zorub, created the most valuable position in VICI Properties Inc. (NYSE:VICI). Parsifal Capital Management had $25.7 million invested in the company at the end of the quarter. Jonathan Litt's Land & Buildings Investment Management also initiated a $25.6 million position during the quarter. The following funds were also among the new VICI investors: William Hyatt's Hudson Way Capital Management, Usman Waheed's Strycker View Capital, and Mark Coe's Intrinsic Edge Capital.

Let's also examine hedge fund activity in other stocks similar to VICI Properties Inc. (NYSE:VICI). We will take a look at Citizens Financial Group Inc (NYSE:CFG), StoneCo Ltd. (NASDAQ:STNE), United Rentals, Inc. (NYSE:URI), Booz Allen Hamilton Holding Corporation (NYSE:BAH), Cable One Inc (NYSE:CABO), Regions Financial Corporation (NYSE:RF), and Credicorp Ltd. (NYSE:BAP). This group of stocks' market caps match VICI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CFG,47,841328,1 STNE,35,1342781,1 URI,40,889794,-3 BAH,25,219237,-2 CABO,24,684886,1 RF,26,191710,-11 BAP,20,174521,-2 Average,31,620608,-2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $621 million. That figure was $1573 million in VICI's case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand Credicorp Ltd. (NYSE:BAP) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks VICI Properties Inc. (NYSE:VICI) is more popular among hedge funds. Our overall hedge fund sentiment score for VICI is 85.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 30% in 2020 through October 23rd but still managed to beat the market by 21 percentage points. Hedge funds were also right about betting on VICI as the stock returned 21.1% since the end of June (through 10/23) 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.

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