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Were Hedge Funds Right About Buying Vail Resorts, Inc. (MTN) in September?

Asma UL Husna

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 8 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Vail Resorts, Inc. (NYSE:MTN).

Vail Resorts, Inc. (NYSE:MTN) was in 35 hedge funds' portfolios at the end of September. MTN has seen an increase in activity from the world's largest hedge funds of late. There were 33 hedge funds in our database with MTN holdings at the end of the previous quarter. Our calculations also showed that MTN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]

Paul Marshall Marshall Wace

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the key hedge fund action encompassing Vail Resorts, Inc. (NYSE:MTN).

How have hedgies been trading Vail Resorts, Inc. (NYSE:MTN)?

At Q3's end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in MTN over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MTN_dec2019

Among these funds, Diamond Hill Capital held the most valuable stake in Vail Resorts, Inc. (NYSE:MTN), which was worth $107.7 million at the end of the third quarter. On the second spot was Select Equity Group which amassed $68.5 million worth of shares. Shellback Capital, Marshall Wace, and Millennium 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 Lansing Management allocated the biggest weight to Vail Resorts, Inc. (NYSE:MTN), around 4.92% of its portfolio. White Elm Capital is also relatively very bullish on the stock, setting aside 4.54 percent of its 13F equity portfolio to MTN.

Consequently, key money managers have been driving this bullishness. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, assembled the largest position in Vail Resorts, Inc. (NYSE:MTN). Shellback Capital had $35.8 million invested in the company at the end of the quarter. Ira Unschuld's Brant Point Investment Management also made a $9.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Alec Litowitz and Ross Laser's Magnetar Capital.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Vail Resorts, Inc. (NYSE:MTN) but similarly valued. We will take a look at Black Knight, Inc. (NYSE:BKI), Omega Healthcare Investors Inc (NYSE:OHI), CPFL Energia S.A. (NYSE:CPL), and OGE Energy Corp. (NYSE:OGE). This group of stocks' market values are similar to MTN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKI,42,883381,-3 OHI,18,176390,1 CPL,3,17897,-1 OGE,16,201507,3 Average,19.75,319794,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $479 million in MTN's case. Black Knight, Inc. (NYSE:BKI) is the most popular stock in this table. On the other hand CPFL Energia S.A. (NYSE:CPL) is the least popular one with only 3 bullish hedge fund positions. Vail Resorts, Inc. (NYSE:MTN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MTN, though not to the same extent, as the stock returned 7.5% during the first two months of the fourth quarter and outperformed the market as well.

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

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