Hedge Funds Dumped Boyd Gaming Right Before Shares Hit the Jackpot

Posted on: December 16, 2019, 11:22h. 

Last updated on: December 16, 2019, 12:30h.

Even the pros make mistakes, and that appears to be the case with some hedge funds with regards to Boyd Gaming Corp. (NYSE:BYD) stock.

Hedge funds soured on Orleans operator Boyd Gaming at the wrong time. (Image: Booking.com)

Shares of the operator of a dozen Las Vegas casinos are up nearly 43 percent this year, making the stock one of the best-performing names among regional gaming equities. Boyd stock has been boosted by a 9.31 percent fourth-quarter gain, meaning hedge funds that dumped the shares in the July through September period left some money on the table.

Heading into the fourth quarter of 2019, a total of 25 of the hedge funds were long this stock, a change of -17% from the second quarter of 2019,” notes hedge fund research firm Insider Monkey.

Translation: 30 hedge funds were bullish on Boyd stock at the end of the second quarter, but that number declined to 25 as of Sept. 30. Departing shares of The Orleans and Gold Coast operator during the April through June period seemed prescient, because the stock tumbled 11.36 percent in the September quarter.

Making Amends

As noted above, Boyd has wiped out the bulk of its third-quarter losses since Oct. 1. The stock is up 36 percent from its August lows and resides just six percent below its 52-week high. Still, some hedge funds eliminated Boyd stakes entirely in the previous quarter.

David Gallo’s Valinor Management cut the largest stake of the ‘upper crust’ of funds, totaling about $68.6 million in stock,” notes Insider Monkey. “Eduardo Abush’s fund, Waterfront Capital Partners, also dumped its stock, about $10.6 million worth.”

With 25 hedgies long the stock, ownership among those investors of Boyd Gaming is above that of rival Red Rock Resorts, Inc. (NASDAQ:RRR), but below the number of funds bullish on other regional gaming equities, such as Eldorado Resorts, Inc. (NASDAQ:ERI).

In dollar terms, the largest hedge fund owner of Boyd equity is Paul Reeder’s PAR Capital Management, which owned $58.1 million of the Sam’s Town operator as of Sept. 30. Mario Gabelli’s GAMCO Investors held $39.3 million worth of the shares at the end of the third quarter.

Maybe More Upside

Past performance doesn’t guarantee future results, but there is a potential catalyst looming for Boyd stock: at this writing, the shares reside 15.1 percent below Wall Street’s consensus price target of $34.54.

If the stock continues climbing, bringing that price forecast into play over the near-term, analysts may be compelled to boost estimates, fanning the flames of a rally in the shares.

Boyd’s leverage to the growth of the domestic sports betting market, as well as local gamblers in Las Vegas making the stock a play on the strength of the US economy, are among the oft-cited bullish traits for the name that Wall Street highlights.

Outside of Nevada, Boyd runs 17 gaming venues in nine states, including five in Louisiana and seven in four states where sports betting is permitted.