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In this article we are going to use hedge fund sentiment as a tool and determine whether Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) has seen an increase in support from the world's most elite money managers in recent months. Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) was in 24 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 28. There were 21 hedge funds in our database with PLAY positions at the end of the fourth quarter. Our calculations also showed that PLAY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the 21st century investor’s toolkit there are a multitude of gauges stock market investors use to grade their holdings. Two of the most underrated gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outpace the market by a very impressive amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Robert Pohly of Samlyn Capital
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Do Hedge Funds Think PLAY Is A Good Stock To Buy Now?
At the end of March, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PLAY over the last 23 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Hill Path Capital held the most valuable stake in Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), which was worth $213.1 million at the end of the fourth quarter. On the second spot was Scopus Asset Management which amassed $69.5 million worth of shares. Citadel Investment Group, Candlestick Capital Management, and MIC Capital Partners 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 Hill Path Capital allocated the biggest weight to Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY), around 12.74% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, earmarking 9.75 percent of its 13F equity portfolio to PLAY.
Now, key money managers have been driving this bullishness. Samlyn Capital, managed by Robert Pohly, created the most outsized position in Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY). Samlyn Capital had $16 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $10.1 million position during the quarter. The following funds were also among the new PLAY investors: Kamyar Khajavi's MIK Capital, Steve Cohen's Point72 Asset Management, and Elise Di Vincenzo Crumbine's Stormborn Capital Management.
Let's go over hedge fund activity in other stocks similar to Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY). We will take a look at Xperi Holding Corporation (NASDAQ:XPER), South Jersey Industries Inc (NYSE:SJI), Nuvation Bio Inc. (NYSE:NUVB), Sally Beauty Holdings, Inc. (NYSE:SBH), Globalstar, Inc. (NYSE:GSAT), Strategic Education Inc (NASDAQ:STRA), and BTRS Holdings Inc. (NASDAQ:BTRS). This group of stocks' market valuations are closest to PLAY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XPER,21,155873,-1 SJI,32,482342,20 NUVB,30,543947,30 SBH,19,127433,-4 GSAT,10,163384,1 STRA,16,232233,1 BTRS,26,310999,26 Average,22,288030,10.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $288 million. That figure was $540 million in PLAY's case. South Jersey Industries Inc (NYSE:SJI) is the most popular stock in this table. On the other hand Globalstar, Inc. (NYSE:GSAT) is the least popular one with only 10 bullish hedge fund positions. Dave & Buster's Entertainment, Inc. (NASDAQ:PLAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PLAY is 65.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately PLAY wasn't nearly as popular as these 5 stocks and hedge funds that were betting on PLAY were disappointed as the stock returned -26.3% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.