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In this article we will analyze whether Inspired Entertainment, Inc. (NASDAQ:INSE) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Inspired Entertainment, Inc. (NASDAQ:INSE) an excellent investment now? Money managers were becoming less hopeful. The number of bullish hedge fund positions retreated by 2 recently. Inspired Entertainment, Inc. (NASDAQ:INSE) was in 5 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 9. Our calculations also showed that INSE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 7 hedge funds in our database with INSE holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Parag Vora of HG Vora Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a glance at the fresh hedge fund action regarding Inspired Entertainment, Inc. (NASDAQ:INSE).
Hedge fund activity in Inspired Entertainment, Inc. (NASDAQ:INSE)
Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in INSE a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, HG Vora Capital Management held the most valuable stake in Inspired Entertainment, Inc. (NASDAQ:INSE), which was worth $11.1 million at the end of the third quarter. On the second spot was 683 Capital Partners which amassed $2.4 million worth of shares. Harvey Partners, Renaissance Technologies, and Royce & Associates 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 HG Vora Capital Management allocated the biggest weight to Inspired Entertainment, Inc. (NASDAQ:INSE), around 0.84% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, earmarking 0.75 percent of its 13F equity portfolio to INSE.
Due to the fact that Inspired Entertainment, Inc. (NASDAQ:INSE) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there is a sect of funds who were dropping their full holdings heading into Q4. At the top of the heap, Donald Sussman's Paloma Partners sold off the biggest position of the "upper crust" of funds watched by Insider Monkey, valued at about $0.1 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Inspired Entertainment, Inc. (NASDAQ:INSE) but similarly valued. These stocks are TRACON Pharmaceuticals Inc (NASDAQ:TCON), Randolph Bancorp, Inc. (NASDAQ:RNDB), Hunt Companies Finance Trust, Inc. (NYSE:HCFT), Emclaire Financial Corp (NASDAQ:EMCF), Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA), Heritage Global Inc. (NASDAQ:HGBL), and Aemetis, Inc (NASDAQ:AMTX). This group of stocks' market values are similar to INSE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TCON,5,22756,0 RNDB,2,613,0 HCFT,5,1880,0 EMCF,2,491,0 STSA,8,21826,-4 HGBL,1,27,1 AMTX,2,3749,-1 Average,3.6,7335,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.6 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $14 million in INSE's case. Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA) is the most popular stock in this table. On the other hand Heritage Global Inc. (NASDAQ:HGBL) is the least popular one with only 1 bullish hedge fund positions. Inspired Entertainment, Inc. (NASDAQ:INSE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INSE is 48.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on INSE as the stock returned 117.9% since the end of Q3 (through 11/27) 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.