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The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Golden Entertainment Inc (NASDAQ:GDEN) from the perspective of those elite funds.
Is Golden Entertainment Inc (NASDAQ:GDEN) a buy here? The smart money is turning less bullish. The number of bullish hedge fund positions were trimmed by 1 in recent months. Our calculations also showed that GDEN isn't among the 30 most popular stocks among hedge funds (see the video below).
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the key hedge fund action encompassing Golden Entertainment Inc (NASDAQ:GDEN).
How have hedgies been trading Golden Entertainment Inc (NASDAQ:GDEN)?
Heading into the third quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GDEN over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, holds the number one position in Golden Entertainment Inc (NASDAQ:GDEN). Nantahala Capital Management has a $34.3 million position in the stock, comprising 1.1% of its 13F portfolio. The second largest stake is held by Derek C. Schrier of Indaba Capital Management, with a $13.2 million position; 2.5% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions consist of Roberto Mignone's Bridger Management, Bryant Regan's Lafitte Capital Management and Brian Gustavson and Andrew Haley's 1060 Capital Management.
Seeing as Golden Entertainment Inc (NASDAQ:GDEN) has experienced falling interest from the smart money, it's easy to see that there was a specific group of hedgies who sold off their full holdings by the end of the second quarter. Interestingly, Israel Englander's Millennium Management sold off the largest investment of all the hedgies followed by Insider Monkey, worth close to $4.3 million in stock. Doug Gordon, Jon Hilsabeck and Don Jabro's fund, Shellback Capital, also dumped its stock, about $3.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.
Let's check out hedge fund activity in other stocks similar to Golden Entertainment Inc (NASDAQ:GDEN). These stocks are Tekla World Healthcare Fund (NYSE:THW), Quad/Graphics, Inc. (NYSE:QUAD), NextCure, Inc. (NASDAQ:NXTC), and Unity Biotechnology, Inc. (NASDAQ:UBX). This group of stocks' market values are closest to GDEN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position THW,1,510,0 QUAD,16,26719,-6 NXTC,8,92180,8 UBX,5,13510,1 Average,7.5,33230,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $79 million in GDEN's case. Quad/Graphics, Inc. (NYSE:QUAD) is the most popular stock in this table. On the other hand Tekla World Healthcare Fund (NYSE:THW) is the least popular one with only 1 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. 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 GDEN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GDEN were disappointed as the stock returned -5.1% 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.
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