How do we determine whether Century Casinos, Inc. (NASDAQ:CNTY) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Century Casinos, Inc. (NASDAQ:CNTY) the right investment to pursue these days? Prominent investors are taking an optimistic view. The number of long hedge fund positions rose by 4 in recent months. Our calculations also showed that CNTY isn't among the 30 most popular stocks among hedge funds (see the video below). CNTY was in 10 hedge funds' portfolios at the end of the second quarter of 2019. There were 6 hedge funds in our database with CNTY holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. We're going to take a look at the fresh hedge fund action encompassing Century Casinos, Inc. (NASDAQ:CNTY).
How are hedge funds trading Century Casinos, Inc. (NASDAQ:CNTY)?
At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 67% from the first quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in CNTY a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Century Casinos, Inc. (NASDAQ:CNTY), with a stake worth $23.1 million reported as of the end of March. Trailing Royce & Associates was Ariel Investments, which amassed a stake valued at $18.4 million. Renaissance Technologies, Driehaus Capital, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the biggest position in Century Casinos, Inc. (NASDAQ:CNTY). Two Sigma Advisors had $0.4 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw's D E Shaw and Peter Algert and Kevin Coldiron's Algert Coldiron Investors.
Let's now review hedge fund activity in other stocks similar to Century Casinos, Inc. (NASDAQ:CNTY). These stocks are The First Bancorp, Inc. (NASDAQ:FNLC), Cutera, Inc. (NASDAQ:CUTR), Concert Pharmaceuticals Inc (NASDAQ:CNCE), and CASI Pharmaceuticals Inc (NASDAQ:CASI). This group of stocks' market valuations match CNTY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FNLC,1,5979,0 CUTR,10,65276,-4 CNCE,13,69573,1 CASI,1,122,-3 Average,6.25,35238,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $60 million in CNTY's case. Concert Pharmaceuticals Inc (NASDAQ:CNCE) is the most popular stock in this table. On the other hand The First Bancorp, Inc. (NASDAQ:FNLC) is the least popular one with only 1 bullish hedge fund positions. Century Casinos, Inc. (NASDAQ:CNTY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CNTY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CNTY were disappointed as the stock returned -20.3% during the third quarter and underperformed 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.