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Hedge Funds Are Piling Into Penn National Gaming, Inc (PENN)

Reymerlyn Martin

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Penn National Gaming, Inc (NASDAQ:PENN) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Penn National Gaming, Inc (NASDAQ:PENN) has experienced an increase in activity from the world's largest hedge funds of late. Penn National Gaming, Inc (NASDAQ:PENN) was in 34 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. There were 18 hedge funds in our database with PENN positions at the end of the first quarter. Our calculations also showed that PENN isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

If you'd ask most shareholders, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation at present, We choose to focus on the leaders of this club, approximately 850 funds. These hedge fund managers direct the majority of the hedge fund industry's total capital, and by keeping track of their top stock picks, Insider Monkey has revealed a number of investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

DUQUESNE CAPITAL
DUQUESNE CAPITAL

Stanley Druckenmiller of Duquesne Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind let's go over the fresh hedge fund action encompassing Penn National Gaming, Inc (NASDAQ:PENN).

What have hedge funds been doing with Penn National Gaming, Inc (NASDAQ:PENN)?

At the end of June, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 89% from the first quarter of 2020. On the other hand, there were a total of 20 hedge funds with a bullish position in PENN a year ago. 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, Arrowstreet Capital was the largest shareholder of Penn National Gaming, Inc (NASDAQ:PENN), with a stake worth $76.4 million reported as of the end of September. Trailing Arrowstreet Capital was Jericho Capital Asset Management, which amassed a stake valued at $68.7 million. ThornTree Capital Partners, Citadel Investment Group, and Duquesne 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 ThornTree Capital Partners allocated the biggest weight to Penn National Gaming, Inc (NASDAQ:PENN), around 6.24% of its 13F portfolio. Chiron Investment Management is also relatively very bullish on the stock, designating 3.36 percent of its 13F equity portfolio to PENN.

As industrywide interest jumped, some big names were leading the bulls' herd. Jericho Capital Asset Management, managed by Josh Resnick, created the largest position in Penn National Gaming, Inc (NASDAQ:PENN). Jericho Capital Asset Management had $68.7 million invested in the company at the end of the quarter. Mark Moore's ThornTree Capital Partners also made a $39.5 million investment in the stock during the quarter. The other funds with brand new PENN positions are Stanley Druckenmiller's Duquesne Capital, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, and Dmitry Balyasny's Balyasny Asset Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Penn National Gaming, Inc (NASDAQ:PENN) but similarly valued. These stocks are Emergent Biosolutions Inc (NYSE:EBS), Littelfuse, Inc. (NASDAQ:LFUS), MorphoSys AG (NASDAQ:MOR), LogMeIn Inc (NASDAQ:LOGM), Redfin Corporation (NASDAQ:RDFN), New Relic Inc (NYSE:NEWR), and Nektar Therapeutics (NASDAQ:NKTR). This group of stocks' market caps are closest to PENN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBS,21,119854,4 LFUS,24,316882,2 MOR,6,12533,1 LOGM,31,785090,3 RDFN,26,203341,6 NEWR,35,1206690,4 NKTR,26,269126,9 Average,24.1,416217,4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $416 million. That figure was $429 million in PENN's case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand MorphoSys AG (NASDAQ:MOR) is the least popular one with only 6 bullish hedge fund positions. Penn National Gaming, Inc (NASDAQ:PENN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PENN is 87.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on PENN as the stock returned 67.3% since Q2 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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