At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Cedar Fair, L.P. (NYSE:FUN) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Cedar Fair, L.P. (NYSE:FUN) investors should pay attention to an increase in hedge fund sentiment recently. FUN was in 10 hedge funds' portfolios at the end of the first quarter of 2020. There were 9 hedge funds in our database with FUN holdings at the end of the previous quarter. Our calculations also showed that FUN isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746830" align="aligncenter" width="400"] Matthew Hulsizer of PEAK6 Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a glance at the key hedge fund action encompassing Cedar Fair, L.P. (NYSE:FUN).
Hedge fund activity in Cedar Fair, L.P. (NYSE:FUN)
At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards FUN over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Cedar Fair, L.P. (NYSE:FUN), with a stake worth $9.8 million reported as of the end of September. Trailing Arrowstreet Capital was Marshall Wace LLP, which amassed a stake valued at $6 million. Miller Value Partners, Six Columns Capital, and Platinum 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 Six Columns Capital allocated the biggest weight to Cedar Fair, L.P. (NYSE:FUN), around 0.99% of its 13F portfolio. Oasis Management is also relatively very bullish on the stock, setting aside 0.61 percent of its 13F equity portfolio to FUN.
As industrywide interest jumped, key money managers were leading the bulls' herd. Six Columns Capital, managed by Brad Stephens, created the most outsized position in Cedar Fair, L.P. (NYSE:FUN). Six Columns Capital had $3.2 million invested in the company at the end of the quarter. Kerr Neilson's Platinum Asset Management also initiated a $2.5 million position during the quarter. The other funds with brand new FUN positions are Robert Bishop's Impala Asset Management, Seth Fischer's Oasis Management, and Matthew Hulsizer's PEAK6 Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Cedar Fair, L.P. (NYSE:FUN) but similarly valued. These stocks are Chart Industries, Inc. (NASDAQ:GTLS), Huron Consulting Group (NASDAQ:HURN), Y-mAbs Therapeutics, Inc. (NASDAQ:YMAB), and Fangdd Network Group Ltd. (NASDAQ:DUO). This group of stocks' market values are similar to FUN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GTLS,21,120048,2 HURN,17,57403,3 YMAB,11,98663,-1 DUO,1,413,0 Average,12.5,69132,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $69 million. That figure was $30 million in FUN's case. Chart Industries, Inc. (NASDAQ:GTLS) is the most popular stock in this table. On the other hand Fangdd Network Group Ltd. (NASDAQ:DUO) is the least popular one with only 1 bullish hedge fund positions. Cedar Fair, L.P. (NYSE:FUN) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on FUN as the stock returned 49.9% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.