Is Monarch Casino & Resort, Inc. (MCRI) A Good Stock To Buy?

Nina Todic

Updated Sun, Dec 23, 2018, 6:39 PM

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Monarch Casino & Resort, Inc. (NASDAQ:MCRI).

Monarch Casino & Resort, Inc. (NASDAQ:MCRI) was in 10 hedge funds' portfolios at the end of the third quarter of 2018. MCRI shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 11 hedge funds in our database with MCRI holdings at the end of the previous quarter. Our calculations also showed that mcri isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

We're going to view the key hedge fund action encompassing Monarch Casino & Resort, Inc. (NASDAQ:MCRI).

What have hedge funds been doing with Monarch Casino & Resort, Inc. (NASDAQ:MCRI)?

Heading into the fourth quarter of 2018, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in MCRI heading into this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Park West Asset Management held the most valuable stake in Monarch Casino & Resort, Inc. (NASDAQ:MCRI), which was worth $69.5 million at the end of the third quarter. On the second spot was Lafitte Capital Management which amassed $43.6 million worth of shares. Moreover, Renaissance Technologies, Driehaus Capital, and Arrowstreet Capital were also bullish on Monarch Casino & Resort, Inc. (NASDAQ:MCRI), allocating a large percentage of their portfolios to this stock.

Due to the fact that Monarch Casino & Resort, Inc. (NASDAQ:MCRI) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of funds that decided to sell off their positions entirely last quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management cut the largest stake of the "upper crust" of funds followed by Insider Monkey, valued at about $0.3 million in call options, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dumped about $0.2 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Monarch Casino & Resort, Inc. (NASDAQ:MCRI) but similarly valued. These stocks are Express, Inc. (NYSE:EXPR), FutureFuel Corp. (NYSE:FF), German American Bancorp., Inc. (NASDAQ:GABC), and Hanmi Financial Corp (NASDAQ:HAFC). This group of stocks' market values resemble MCRI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXPR,24,129129,6 FF,11,72328,1 GABC,5,9561,0 HAFC,12,54930,-1 Average,13,66487,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $141 million in MCRI's case. Express, Inc. (NYSE:EXPR) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 5 bullish hedge fund positions. Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard EXPR might be a better candidate to consider a long position.

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

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