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  • Was The Smart Money Right About Vail Resorts, Inc. (MTN)?


  • 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 Vail Resorts, Inc. (NYSE:MTN).

    Vail Resorts, Inc. (NYSE:MTN) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 37 hedge funds' portfolios at the end of June. Our calculations also showed that MTN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Hill-Rom Holdings, Inc. (NYSE:HRC), Vornado Realty Trust (NYSE:VNO), and Reynolds Consumer Products Inc. (NASDAQ:REYN) to gather more data points. Our calculations also showed that MTN isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

    Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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    John Rogers Ariel Investments

    John Rogers of Ariel Investments

    At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind let's view the key hedge fund action regarding Vail Resorts, Inc. (NYSE:MTN).

    At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in MTN over the last 20 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

    Of the funds tracked by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in Vail Resorts, Inc. (NYSE:MTN). Select Equity Group has a $322.8 million position in the stock, comprising 1.9% of its 13F portfolio. Coming in second is Ric Dillon of Diamond Hill Capital, with a $101.9 million position; 0.6% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of John W. Rogers's Ariel Investments, Josh Resnick's Jericho Capital Asset Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to Vail Resorts, Inc. (NYSE:MTN), around 4.54% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, setting aside 3.99 percent of its 13F equity portfolio to MTN.

    Due to the fact that Vail Resorts, Inc. (NYSE:MTN) has witnessed declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few money managers that decided to sell off their full holdings last quarter. Intriguingly, Jack Woodruff's Candlestick Capital Management said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, comprising close to $25.8 million in stock. Ricky Sandler's fund, Eminence Capital, also dumped its stock, about $24.7 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

    Let's also examine hedge fund activity in other stocks similar to Vail Resorts, Inc. (NYSE:MTN). These stocks are Hill-Rom Holdings, Inc. (NYSE:HRC), Vornado Realty Trust (NYSE:VNO), Reynolds Consumer Products Inc. (NASDAQ:REYN), Exelixis, Inc. (NASDAQ:EXEL), Americold Realty Trust (NYSE:COLD), Formula One Group (NASDAQ:FWONA), and Mohawk Industries, Inc. (NYSE:MHK). This group of stocks' market valuations are closest to MTN's market valuation.

    [table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HRC,30,944643,0 VNO,17,126380,-8 REYN,17,319911,0 EXEL,39,1170545,9 COLD,29,290324,4 FWONA,17,248890,0 MHK,32,693381,-4 Average,25.9,542011,0.1 [/table]

    View table here if you experience formatting issues.

    As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $542 million. That figure was $753 million in MTN's case. Exelixis, Inc. (NASDAQ:EXEL) is the most popular stock in this table. On the other hand Vornado Realty Trust (NYSE:VNO) is the least popular one with only 17 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 overall hedge fund sentiment score for MTN is 78.9. 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. 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on MTN as the stock returned 27.4% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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