The world's largest funds or mega funds, managing between $100 billion and over a trillion dollars, such as Fidelity Investments, Goldman Sachs, and Vanguard Group, together control almost a third of the assets invested in the US equity markets, but number just over 30 out of the tens of thousands of funds that invest in the US equity markets. Individually, and collectively, they pack enough firepower to move stocks based on their trading activities.
In this article, we examine based on our research of their latest available Q3 institutional 13-F filings stocks in the leisure and recreation group that they are most bullish and bearish about. We have included in the leisure group companies that are manufacturers of leisure and recreation products, leisure and recreation services providers, as well as retailers of primarily leisure and recreation products.
Taken together, these mega managers are bearish on the group, cutting a net $811 million from their prior $32.13 billion prior quarter holdings in the group, and they are equal-weight in the group (for more general information on these mega funds, please look at the end of the article). The following are the leisure and recreation group companies (ex-travel services companies) that mega fund managers are bullish about (see Table):
Dicks Sporting Goods Inc. (DKS): DKS is leading sporting goods retailer in the US, operating over 470 Dick's Sporting Goods stores and over 80 Golf Galaxy stores. Mega funds added a net $117 million to their $1.49 billion prior quarter position in the company, with the top buyers being Goldman Sachs ($111 million), Fidelity Investments ($66 million) and Wells Fargo & Co. ($41 million), and the top holders at the end of Q3 was by far Wells Fargo ($329 million).
DKS has been one of the strongest long-term performers in the retail category, up over ten-fold in the last almost ten years, and the shares trade at a current 21 P/E on a TTM basis and 3.2 P/B compared to averages of 17.2 and 1.4 for its peers in the retail miscellaneous/diversified group, while earnings are projected to rise strong from $1.63 in 2011 to $2.36 in 2013 at a 20.3% annual growth rate.
DKS shares were up 16% this past week after the company gave in-line guidance for Q4, in contrast to disappointing guidance reported earlier this week at peer athletic apparel and outdoor equipment retail stores chain operator Big 5 Sporting Corp. (BGFV). Also, DKS announced a $200 million stock buy-back over the next twelve months.
HomeAway Inc. (AWAY): AWAY operates an online marketplace for vacation rentals in over 145 countries, connecting property owners and managers with vacation travelers. Mega funds added a net $96 million in Q3 to their $10 million prior quarter position, with the top buyer being MFS Investment Management ($27 million), and the top holders at the end of Q3 being MFS ($27 million) and JP Morgan Chase & Co. ($18 million).
AWAY has been in a persistent downtrend ever since shortly after its IPO last June, now down about 40% from the trading range on the opening day and near its lows. Its shares trade at a premium 45 forward P/E and 4.6 P/B compared to averages of 26.8 and 4.1 for its peers in the leisure & recreation services group.
The following are the leisure and recreation group companies that mega fund managers are most bearish about (see Table):
Carnival Corp. (CCL): CCL operates as a cruise and vacations company providing cruises to various vacation destinations with a total of 98 ships under ten brands servicing North America, Asia, Australia and Europe. Mega funds cut a net $589 million, their largest collective sell, from their $8.39 billion prior quarter position in the company.
The top seller was UBS Global Asset Management ($179 million). CCL is down about 30% in the past year, and it trades at 11-12 forward P/E and 1.2 P/B compared to averages of 26.8 and 4.1 for its peers in the leisure & recreation services group. However, more specifically, CCL also trades at a slight premium to its nearest competitor Royal Caribbean Cruises (RCL) that trades at 9-10 forward P/E and 0.8 P/B.
Eastman Kodak (EK): EK manufactures digital and film imaging systems for the photographic and graphic communications markets. The once-esteemed company is down almost 90% in the past year and trades below $1, as it bleeds cash and battles bankruptcy, after being left behind in the digital camera revolution. The stock was volatile on Friday after a Bloomberg story emerged that the company was in talks with Citigroup to provide emergency bankruptcy financing in the event that the company does file for bankruptcy.
In Q3, mega fund managers were bearish on EK, selling a net $7 million, and the biggest sellers were Deutsche Bank ($2 million) and Goldman Sachs ($2 million). Since the end of Q3, two mega fund managers, Blackrock and Fidelity Investments have amended their ownership of EK. Specifically, Fidelity Investments amended its ownership of EK to 11.0 million or 4.0% of outstanding shares, thereby ceasing to be a 5% or more beneficial owner.
Netflix Inc. (NFLX): NFLX is a provider of subscription based Internet services for watching online movies and TV shows in the US and internationally via Netflix.com, and for subscribers in the US it also has a service to deliver DVDs and Blu-ray discs to their homes. In Q3, mega funds collectively cut a net $141 million from their $1.93 billion prior quarter position, with the biggest sellers being Ameriprise Financial ($102 million), Neuberger Berman Group ($85 million) and Fidelity Investments ($71 million).
NFLX shares have been a disaster lately, off by more than two-thirds from its highs in July last year, on a series of missteps from Management. Analysts currently project earnings to fall off from $4.09 in 2011 to 3c in 2012.
Royal Caribbean Cruises (RCL): RCL operates in cruise vacation industry in North America and internationally, and owns five cruise brands: Royal Caribbean International, Celebrity Cruises, Azamara Cruises, Pullmantur and CDF Croisieres de France. Mega funds cut $74 million in Q3 from their $1.19 billion prior quarter position, with the biggest sellers being AllianceBernstein ($51 million) and JP Morgan Chase & Co. ($32 million).
RCL shares have been weak, down more than 40% in the past year. They trade at a discount 9-10 forward P/E and 0.8 P/B compared to averages of 26.8 and 4.1 for its peers in the leisure & recreation services group, while its earnings are projected to rise at a strong 24.1% annual growth from $2.02 in 2010 to $3.11 in 2012.
Brunswick Corp. (BC): BC manufactures recreation products worldwide, including marine engines, various boat styles, fitness equipment and bowling and billiards equipment. Mega funds cut $107 million in Q3 from their $1.08 billion prior quarter position, with the biggest sellers being Fidelity Investments ($53 million) and Wellington Capital Management ($39 million). BC trades at 14-15 forward P/E and 9.3 P/B compared to averages of 23.4 and 3.6 for its peers in the leisure & recreation products group.
Other companies in the leisure and recreation products and services group that mega funds are bearish on (see Table) include media and entertainment company Discovery Communications Inc. (DISCA), in which they cut a net $26 million; famed motorcycle manufacturer Harley Davidson Inc. (HOG), in which they cut a net $48 million; all-terrain recreation and utility vehicles and snowmobiles manufacturer Polaris Industries Inc. (PII), in which they cut a net $7 million; and bookstore retail chain operator Barnes & Noble Inc. (BKS), in which they cut a net $15 million.
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General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the US equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.