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Q4 2017 Hedge Fund Trends

Lorelei Tavzel Research Associate

In this piece we analyzed Q4 2017 hedge fund ownership filings to bring you the latest hedge fund trends—Las Vegas, Internet, and Travel.

2017 is over, and hedge fund insights from Q4 are in. The trends below are based on the latest regulatory SEC 13F filings. Novus provides clients with a more thorough analysis, based on the Novus Hedge Fund Universe (HFU), a value-weighted portfolio of over 1,500 carefully selected hedge fund (HF) managers.

Las Vegas: MGM Resorts, MGM Growth, Caesars, and VICI

MGM and MGP: MGM Resorts International’s HF % of Shares Outstanding (S.O.) rose substantially throughout 2017, from 12.6% to 21% at year-end 2017. We see an increase in existing positions from Soroban, Maverick, Eminence, and Fir Tree. Meanwhile, Canyon trimmed its ~$650M position.

In addition, initiated positions include Third Point at $100M, Melvin at $84M, Appaloosa at $78M, and HG Vora purchasing $58M in shares. Alternatively, the following managers exited from the position at Q4: Point State, Highline, Highfields, Jericho, and Discovery.

MGM Growth Properties sent a merger proposal to VICI, discussed below. Most funds exited or decreased their position; HF % of S.O. fell from 23.5% to 14.5%.

CZR and VICI: After Caesars Entertainment Corp entered Chapter 11 bankruptcy in January 2015, HF ownership hovered around 28%. The company emerged from protection in October 2017 and HF % of S.O. rose to 42% as of 12/31/2017.

Positions exceeding $100M in the name at year-end included Canyon $560M, Senator $471M, Soros $436M, Paulson $237M, Silver Point $195M, Highline $120M, Millennium $112M, and Governors Lane $111M. Other notable shareholders include, PAR at $75M, Appaloosa at $74M, Holocene at $67M, and Elliott at $61M.

As part of the bankruptcy reorganization, VICI Properties spun-out of Caesars as a REIT. In November, Caesars sold the real estate of Harrah’s Las Vegas to VICI, but will continue to lease and operate Harrah’s. Mark Frissora, CEO of Caesars Entertainment said, “The sale and leaseback transaction is our first post-emergence transaction with VICI and maintains Harrah’s Las Vegas’ connectivity to our network, which will create value and provide benefits to our guests.”

The only hedge funds invested in the company as of 12/31 were Canyon Capital at $675M, Solus at $376M, and Senator with a $359M position.

Hedge Fund Trends Q4 2017

Internet: Yandex NV and Baidu

YNDX: Shares for “The Google of Russia” gained 32% during FY 2017. The company just completed a test of its self-driving taxi, after announcing development last May. HF ownership of Yandex NV nearly doubled in Q3 2017 from 6.8% to 11.5%, including initiations from Point72, Maplelane, and Palestra. In Q4, HF % of S.O. sat at 10%, with Sachem Head initiating a $76M position. Palestra, owning $82M of shares added to their position, along with Cadian at $77M, Melvin at $75M, and EastBay at $60M.

BIDU: The company is keeping busy with partnerships, currently working with Netflix to bring content to its Chinese video-streaming service iQiyi. In January this year, the company announced plans to jointly develop autonomous driving technology with BlackBerry. There appears to be disagreement among HFs on Baidu however. Managers that initiated new positions include Broad Peak with a $160M investment, Suvretta at $115M, PFM at $93M, and Keywise at $43M. Managers exiting the position included Tourbillon, TCI, Coatue, Discovery, Darsana, and Eminence.

Travel: Despegar.com, Expedia, and Priceline

DESP: The “Expedia / Priceline of South America” went public in Q3 2017, and Expedia owns a 14% stake in the company. HF IPO investors Tiger

Global, Two Creeks, and SCGE stayed the course with Despegar in Q4, owning a cumulative 45.51% of all shares outstanding. Tiger Global, was the largest investor in the company with a $830M stake, over 3x Expedia’s stake.

EXPE: HF ownership in Expedia Inc. decreased throughout 2017 from 24.3% in December 2016, down to 15.7% by Q4 2017. The largest exits contributing to this were Lone Pine, JANA, Coatue, Tourbillon, Eminence, and Brahman. New HF shareholders include Senator at $332M, Highfields at $100M, and SRS at $41M. Dorsal, Fir Tree and PAR, all existing shareholders, increased their stake in the company, with PAR’s position approaching $1B.

BKNG: BKNG, previously PCLN, underwent a rebranding on February 27th 2018 it is now formally known as Booking Holdings Inc. In 2017, HF ownership hovered between 5-6%. The largest holders continue to be Tiger Global at $1.4B, Lone Pine at $960M, PAR at $240M, and Altimeter at $214M. Notable exists include Viking, Glenview, Soroban, JANA, Appaloosa, and Melvin.

Hede Fund q4 2018 trends

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