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Is GDEN A Good Stock To Buy Now?

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Debasis Saha
·6 min read
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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Golden Entertainment Inc (NASDAQ:GDEN) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is GDEN a good stock to buy now? Hedge funds were getting less optimistic. The number of bullish hedge fund bets went down by 3 in recent months. Golden Entertainment Inc (NASDAQ:GDEN) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that GDEN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Wil Harkey Nantahala Capital
Wil Harkey Nantahala Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a look at the recent hedge fund action encompassing Golden Entertainment Inc (NASDAQ:GDEN).

Do Hedge Funds Think GDEN Is A Good Stock To Buy Now?

At the end of September, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GDEN over the last 21 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is GDEN A Good Stock To Buy?
Is GDEN A Good Stock To Buy?

Among these funds, Nantahala Capital Management held the most valuable stake in Golden Entertainment Inc (NASDAQ:GDEN), which was worth $29.4 million at the end of the third quarter. On the second spot was Indaba Capital Management which amassed $13 million worth of shares. Renaissance Technologies, 1060 Capital Management, and GAMCO Investors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 1060 Capital Management allocated the biggest weight to Golden Entertainment Inc (NASDAQ:GDEN), around 7.26% of its 13F portfolio. Indaba Capital Management is also relatively very bullish on the stock, setting aside 4.14 percent of its 13F equity portfolio to GDEN.

Due to the fact that Golden Entertainment Inc (NASDAQ:GDEN) has experienced a decline in interest from hedge fund managers, it's safe to say that there exists a select few funds who sold off their full holdings last quarter. Interestingly, Paul Tudor Jones's Tudor Investment Corp said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, worth an estimated $0.3 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also cut its stock, about $0.3 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Golden Entertainment Inc (NASDAQ:GDEN). These stocks are Arrow Financial Corporation (NASDAQ:AROW), BioSpecifics Technologies Corp. (NASDAQ:BSTC), Xenon Pharmaceuticals Inc (NASDAQ:XENE), Ruth's Hospitality Group, Inc. (NASDAQ:RUTH), Resolute Forest Products Inc (NYSE:RFP), Chuy's Holdings Inc (NASDAQ:CHUY), and Athersys, Inc. (NASDAQ:ATHX). This group of stocks' market values match GDEN's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AROW,3,10861,0 BSTC,9,48738,1 XENE,26,195443,-1 RUTH,11,39044,-3 RFP,13,170346,5 CHUY,14,33441,-2 ATHX,6,2425,-4 Average,11.7,71471,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $67 million in GDEN's case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand Arrow Financial Corporation (NASDAQ:AROW) is the least popular one with only 3 bullish hedge fund positions. Golden Entertainment Inc (NASDAQ:GDEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GDEN is 42.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on GDEN as the stock returned 32.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.

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