Wynn Resorts Fell Out of Favor with Hedge Funds Amid Q1 Slide

Posted on: July 11, 2020, 12:17h. 

Last updated on: July 13, 2020, 03:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Wynn Resorts (NASDAQ:WYNN) stock was one of the most repudiated gaming names in the first quarter, experiencing a peak-to-trough decline of approximately 77 percent. That prompted some hedge funds to bail on the casino operator’s shares.

Wynn Resorts No Favorite Of Hedge Funds
Hedge funds continued bailing on Wynn Resorts stock in the first quarter. (Image: Fox Business)

The Encore owner finished 2019 on a strong note, which carried over into the new year, as the stock gained more than 25 percent from December through its late January high. Then came a sharp February pullback caused by a 15-day closure of Macau casinos by the coronavirus pandemic.

In any given quarter, Wynn depends on the world’s largest gaming center for two-thirds or more of its revenue, explaining why the tumble in this name started prior to those endured by domestically focused operators.

Losses for Wynn investors accelerated in March as the company was forced to close Wynn Las Vegas, neighboring Encore, and Encore Boston Harbor as part of the broader COVID-19 economic shutdown. That could have been an impetus for some hedge funds to bail on the stock.

Wynn shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months,” according to Insider Monkey, a hedge fund data research firm. “Wynn was in 40 hedge funds’ portfolios at the end of March. There were 44 hedge funds in our database with WYNN positions at the end of the previous quarter.”

Broadly speaking, hedge funds have long histories of embracing gaming equities. However, the current roster of the 30 most widely held stocks by these investment managers contains no casino operators.

Missing Steve?

The first quarter of 2020 extended a run of hedge funds bailing on Wynn stock. While there was a modest increase in those types of investment vehicles owning the gaming equity from the July through September period of 2019 to the last three months of that year, the over-arching trend of hedge fund ownership of Wynn shares is lower.

Hedge fund ownership of Wynn peaked at 50 in the first quarter of 2018, up from a low of 30 in the July through September period of 2015. Perhaps coincidentally, the subsequent decline in hedge fund interest in the stock coincided with Steve Wynn’s ouster from the company he founded amid a slew of sexual misconduct allegations.

By late March 2018, Wynn liquidated his entire stake in the gaming enterprise bearing his name. Since then, there have only been two quarters in which hedge fund ownership of the stock increased.

The stock traded around $200 when the sexual assault allegations hit the news. Wynn exited the equity at $180 – two price points the shares have yet to return to.

Some Big Names Remain

In terms of dollars allocated to Wynn equity, Melvin Capital Management led the way at the end of March with a stake valued at $97.7 million. That was followed by Citadel Investment Group at $73.7 million, according to Insider Monkey.

By percentage allocated to the gaming name, Columbus Hill Capital Management is the leader with 3.75 percent of its total portfolio in Wynn stock. Alden Global Capital isn’t far behind at 3.71 percent as of March 31.