Red Rock Resorts, Inc. (NASDAQ: RRR) is cobbling together a little traction after a poor start to 2019, including a brutal plunge that lasted for much of the second and third quarters.
The recent gains from the Palms operator confirm the intrepid argument of investors that the stock looked attractive around its nadir in the third quarter. Data indicates that during that time frame, some market participants joined the regional gaming brand.
“At Q3’s end, a total of 17 of the hedge funds were long this stock, a change of six percent from the previous quarter,” according to hedge fund data tracker Insider Monkey.
Red Rock equity hedge fund ownership is off the peaks seen in mid-2018, but ticked higher than in the second quarter. Share investors, both qualified and retail, who supported the stock in the July through September period are being rewarded as the shares have risen from the August lows by 39.50 percent and are rising by almost 10 percent this month.
Broadly speaking, this year in the midst of a slow post-renovation ramp-up at the Palms, Wall Street analysts are cautious on Red Rock stock. Even with the aforementioned recent bullishness deployed on Red Rock, the stock is only 15.12 percent year – to-date, well behind the S&P 500 and comparable-size regional gaming names such as Boyd Gaming (NYSE: BYD) and Penn National Gaming (NASDAQ: PENN).
Red Rock’s hedge fund holding also funds regional rivals including Penn National and Eldorado Resorts (NASDAQ: ERI). Some funds, however, have recently added or introduced large-scale stakes in the Station Casinos operator.
“With hedgies’ sentiment swirling, there exists an ‘upper tier’ of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions),” notes Insider Monkey.
As of Sept. 30, Diamond Hill Capital, which held about $148 million worth of the shares of the gaming company, was the hedge fund with the highest dollar stake in Red Rock. Next was $61.2 million in Long Pond Securities.
New Red Rock Resorts hedge fund investors included Zimmer Partners, Steve Cohen’s Point72 Asset Management, Centenus Global Investments, Weld Capital Management, and Neo Ivy Capital during the third quarter.
These investments could be further compensated if sell-side analysts push their stock price estimates higher, which they might be expected to do in the near future. Red Rock’s average price target is $24.10 and the stock closed on Friday at $23.38, suggesting that if the run goes higher, analysts may be forced to increase price estimates.
The median numerical score on Red Rock is 3.82 on a scale of one to five, with one being “extremely bearish” and five being “very bullish.” Of the 11 analysts tracking the stocks, six have on stock “buy” or “outperform” ratings, while five have a “positive” rating equivalent on them.