We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Century Casinos, Inc. (NASDAQ:CNTY).
Is Century Casinos, Inc. (NASDAQ:CNTY) a bargain? Hedge funds are turning bullish. The number of long hedge fund bets improved by 3 lately. Our calculations also showed that CNTY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_193003" align="alignnone" width="600"] Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the recent hedge fund action surrounding Century Casinos, Inc. (NASDAQ:CNTY).
Hedge fund activity in Century Casinos, Inc. (NASDAQ:CNTY)
Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in CNTY a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Century Casinos, Inc. (NASDAQ:CNTY), which was worth $21.5 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $9.1 million worth of shares. Renaissance Technologies, Driehaus Capital, and Arrowstreet Capital 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 Moab Capital Partners allocated the biggest weight to Century Casinos, Inc. (NASDAQ:CNTY), around 0.68% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to CNTY.
Now, key hedge funds were breaking ground themselves. Moab Capital Partners, managed by Michael M. Rothenberg, created the biggest position in Century Casinos, Inc. (NASDAQ:CNTY). Moab Capital Partners had $1.8 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle's Springbok Capital and Paul Marshall and Ian Wace's Marshall Wace.
Let's now take a look at hedge fund activity in other stocks similar to Century Casinos, Inc. (NASDAQ:CNTY). We will take a look at Habit Restaurants Inc (NASDAQ:HABT), CIM Commercial Trust Corporation (NASDAQ:CMCT), Weyco Group, Inc. (NASDAQ:WEYS), and Commercial Vehicle Group, Inc. (NASDAQ:CVGI). This group of stocks' market caps resemble CNTY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HABT,13,38775,1 CMCT,2,579,1 WEYS,3,9345,0 CVGI,11,46531,-2 Average,7.25,23808,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $51 million in CNTY's case. Habit Restaurants Inc (NASDAQ:HABT) is the most popular stock in this table. On the other hand CIM Commercial Trust Corporation (NASDAQ:CMCT) is the least popular one with only 2 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 4.8% during the fourth quarter (through the end of November) 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.