We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Melco Resorts & Entertainment Limited (NASDAQ:MLCO).
Melco Resorts & Entertainment Limited (NASDAQ:MLCO) has seen an increase in enthusiasm from smart money of late. Our calculations also showed that MLCO 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.
In the 21st century investor’s toolkit there are dozens of signals stock traders use to grade publicly traded companies. A duo of the most underrated signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite money managers can trounce the market by a healthy margin (see the details here).
[caption id="attachment_339612" align="aligncenter" width="600"] Kerr Neilson of Platinum Asset Management[/caption]
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. We're going to go over the key hedge fund action encompassing Melco Resorts & Entertainment Limited (NASDAQ:MLCO).
How are hedge funds trading Melco Resorts & Entertainment Limited (NASDAQ:MLCO)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MLCO over the last 17 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Hillhouse Capital Management, managed by Lei Zhang, holds the biggest position in Melco Resorts & Entertainment Limited (NASDAQ:MLCO). Hillhouse Capital Management has a $85.3 million position in the stock, comprising 1.2% of its 13F portfolio. The second most bullish fund manager is Platinum Asset Management, led by Kerr Neilson, holding a $58.7 million position; 1.3% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Brett Barakett's Tremblant Capital, Renaissance Technologies and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Indus Capital allocated the biggest weight to Melco Resorts & Entertainment Limited (NASDAQ:MLCO), around 4.66% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, designating 3.27 percent of its 13F equity portfolio to MLCO.
Now, key money managers have been driving this bullishness. Hillhouse Capital Management, managed by Lei Zhang, created the most valuable position in Melco Resorts & Entertainment Limited (NASDAQ:MLCO). Hillhouse Capital Management had $85.3 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also initiated a $10.7 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Fang Zheng's Keywise Capital Management, and Israel Englander's Millennium Management.
Let's go over hedge fund activity in other stocks similar to Melco Resorts & Entertainment Limited (NASDAQ:MLCO). We will take a look at Teck Resources Ltd (NYSE:TECK), RPM International Inc. (NYSE:RPM), Bright Horizons Family Solutions Inc (NYSE:BFAM), and Brookfield Property Partners LP (NASDAQ:BPY). This group of stocks' market values are closest to MLCO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TECK,17,575085,-6 RPM,32,410079,7 BFAM,27,216673,7 BPY,8,32207,2 Average,21,308511,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $534 million in MLCO's case. RPM International Inc. (NYSE:RPM) is the most popular stock in this table. On the other hand Brookfield Property Partners LP (NASDAQ:BPY) is the least popular one with only 8 bullish hedge fund positions. Melco Resorts & Entertainment Limited (NASDAQ:MLCO) 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 MLCO as the stock returned 10.5% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.