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Were Hedge Funds Right About Dumping Bally’s Corporation (BALY)?

·6 min read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article we look at what those investors think of Bally's Corporation (NYSE:BALY).

Is Bally's Corporation (NYSE:BALY) the right investment to pursue these days? Investors who are in the know were becoming less hopeful. The number of long hedge fund bets decreased by 7 in recent months. Bally's Corporation (NYSE:BALY) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 25. Our calculations also showed that BALY isn't among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners
Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind let's take a glance at the new hedge fund action surrounding Bally's Corporation (NYSE:BALY).

Do Hedge Funds Think BALY Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BALY over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BALY A Good Stock To Buy?
Is BALY A Good Stock To Buy?

More specifically, PAR Capital Management was the largest shareholder of Bally's Corporation (NYSE:BALY), with a stake worth $176.9 million reported as of the end of March. Trailing PAR Capital Management was GLG Partners, which amassed a stake valued at $56.5 million. Contrarius Investment Management, Driehaus Capital, and Solus Alternative Asset 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 Solus Alternative Asset Management allocated the biggest weight to Bally's Corporation (NYSE:BALY), around 8.46% of its 13F portfolio. Collaborative Holdings Management is also relatively very bullish on the stock, dishing out 6.06 percent of its 13F equity portfolio to BALY.

Judging by the fact that Bally's Corporation (NYSE:BALY) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that slashed their full holdings by the end of the first quarter. Interestingly, Renaissance Technologies dumped the biggest position of the "upper crust" of funds tracked by Insider Monkey, valued at an estimated $5.4 million in stock, and Elise Di Vincenzo Crumbine's Stormborn Capital Management was right behind this move, as the fund dropped about $3.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 7 funds by the end of the first quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Bally's Corporation (NYSE:BALY) but similarly valued. These stocks are NetScout Systems, Inc. (NASDAQ:NTCT), TPI Composites, Inc. (NASDAQ:TPIC), Sonic Automotive Inc (NYSE:SAH), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Eventbrite, Inc. (NYSE:EB), Health Catalyst, Inc (NASDAQ:HCAT), and Constellium SE (NYSE:CSTM). This group of stocks' market values are similar to BALY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTCT,11,115827,4 TPIC,18,124306,-9 SAH,17,102454,-1 SASR,12,38897,4 EB,24,351562,-2 HCAT,20,134687,-1 CSTM,36,377226,1 Average,19.7,177851,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $178 million. That figure was $416 million in BALY's case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand NetScout Systems, Inc. (NASDAQ:NTCT) is the least popular one with only 11 bullish hedge fund positions. Bally's Corporation (NYSE:BALY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BALY is 33.6. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately BALY wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BALY investors were disappointed as the stock returned -28.6% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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