Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Wynn Resorts, Limited (NASDAQ:WYNN).
Wynn Resorts, Limited (NASDAQ:WYNN) was in 44 hedge funds' portfolios at the end of December. WYNN has experienced an increase in hedge fund interest recently. There were 38 hedge funds in our database with WYNN holdings at the end of the previous quarter. Our calculations also showed that WYNN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To the average investor there are numerous tools stock traders can use to assess publicly traded companies. Some of the less utilized tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass their index-focused peers by a superb amount (see the details here).
[caption id="attachment_670753" align="aligncenter" width="399"] John Armitage of Egerton Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a peek at the latest hedge fund action surrounding Wynn Resorts, Limited (NASDAQ:WYNN).
What does smart money think about Wynn Resorts, Limited (NASDAQ:WYNN)?
At Q4's end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the third quarter of 2019. On the other hand, there were a total of 46 hedge funds with a bullish position in WYNN a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Melvin Capital Management was the largest shareholder of Wynn Resorts, Limited (NASDAQ:WYNN), with a stake worth $354 million reported as of the end of September. Trailing Melvin Capital Management was OZ Management, which amassed a stake valued at $162.2 million. Egerton Capital Limited, Citadel Investment Group, and Melvin Capital 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 Columbus Hill Capital Management allocated the biggest weight to Wynn Resorts, Limited (NASDAQ:WYNN), around 5.53% of its 13F portfolio. MIK Capital is also relatively very bullish on the stock, setting aside 4.19 percent of its 13F equity portfolio to WYNN.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Candlestick Capital Management, managed by Jack Woodruff, established the biggest position in Wynn Resorts, Limited (NASDAQ:WYNN). Candlestick Capital Management had $27.3 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also initiated a $15.6 million position during the quarter. The other funds with brand new WYNN positions are Gregg Moskowitz's Interval Partners, Kamyar Khajavi's MIK Capital, and Gavin Baker's Atreides Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Wynn Resorts, Limited (NASDAQ:WYNN) but similarly valued. We will take a look at Campbell Soup Company (NYSE:CPB), Diamondback Energy Inc (NASDAQ:FANG), Celanese Corporation (NYSE:CE), and CNH Industrial NV (NYSE:CNHI). This group of stocks' market caps are closest to WYNN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPB,29,1025914,-5 FANG,44,712696,0 CE,31,924932,10 CNHI,16,333220,-1 Average,30,749191,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $749 million. That figure was $1067 million in WYNN's case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 16 bullish hedge fund positions. Wynn Resorts, Limited (NASDAQ:WYNN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately WYNN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on WYNN were disappointed as the stock returned -41.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.