It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds' favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Take-Two Interactive Software, Inc. (NASDAQ:TTWO) and compare its performance against hedge funds' favorite stocks.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) investors should pay attention to a decrease in support from the world's most elite money managers recently. TTWO was in 57 hedge funds' portfolios at the end of the third quarter of 2019. There were 60 hedge funds in our database with TTWO holdings at the end of the previous quarter. Our calculations also showed that TTWO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
At the moment there are tons of formulas shareholders use to evaluate publicly traded companies. A couple of the most under-the-radar formulas are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outclass the broader indices by a significant margin (see the details here).
We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let's take a look at the new hedge fund action surrounding Take-Two Interactive Software, Inc. (NASDAQ:TTWO).
Hedge fund activity in Take-Two Interactive Software, Inc. (NASDAQ:TTWO)
Heading into the fourth quarter of 2019, a total of 57 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TTWO over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Melvin Capital Management was the largest shareholder of Take-Two Interactive Software, Inc. (NASDAQ:TTWO), with a stake worth $313.7 million reported as of the end of September. Trailing Melvin Capital Management was Eminence Capital, which amassed a stake valued at $175.5 million. Southpoint Capital Advisors, Palestra Capital Management, and Citadel Investment Group 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 BlueDrive Global Investors allocated the biggest weight to Take-Two Interactive Software, Inc. (NASDAQ:TTWO), around 12.42% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, dishing out 11.5 percent of its 13F equity portfolio to TTWO.
Because Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has experienced bearish sentiment from the smart money, we can see that there lies a certain "tier" of funds who sold off their full holdings by the end of the third quarter. Interestingly, Jacob Doft's Highline Capital Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, totaling about $64.4 million in stock. James Parsons's fund, Junto Capital Management, also dumped its stock, about $49.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Take-Two Interactive Software, Inc. (NASDAQ:TTWO). These stocks are Live Nation Entertainment, Inc. (NYSE:LYV), Campbell Soup Company (NYSE:CPB), Nomura Holdings, Inc. (NYSE:NMR), and Korea Electric Power Corporation (NYSE:KEP). All of these stocks' market caps are closest to TTWO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LYV,40,1097828,1 CPB,31,972740,5 NMR,5,24828,-2 KEP,6,43753,-1 Average,20.5,534787,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $535 million. That figure was $1597 million in TTWO's case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately TTWO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TTWO were disappointed as the stock returned 18.6% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.