"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards International Game Technology PLC (NYSE:IGT) and see how it was affected.
International Game Technology PLC (NYSE:IGT) investors should be aware of a decrease in support from the world's most elite money managers recently. IGT was in 32 hedge funds' portfolios at the end of the first quarter of 2019. There were 34 hedge funds in our database with IGT holdings at the end of the previous quarter. Our calculations also showed that igt isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_747408" align="aligncenter" width="473"] Paul Reeder of PAR Capital[/caption]
Let's take a glance at the recent hedge fund action encompassing International Game Technology PLC (NYSE:IGT).
What have hedge funds been doing with International Game Technology PLC (NYSE:IGT)?
Heading into the second quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IGT over the last 15 quarters. 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, BloombergSen was the largest shareholder of International Game Technology PLC (NYSE:IGT), with a stake worth $87.3 million reported as of the end of March. Trailing BloombergSen was Samlyn Capital, which amassed a stake valued at $72.4 million. HG Vora Capital Management, Point72 Asset Management, and PAR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since International Game Technology PLC (NYSE:IGT) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers that slashed their positions entirely heading into Q3. At the top of the heap, Steven Tananbaum's GoldenTree Asset Management cut the biggest investment of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $28.3 million in stock. Cliff Asness's fund, AQR Capital Management, also sold off its stock, about $9.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to International Game Technology PLC (NYSE:IGT). We will take a look at Union Bankshares Corporation (NASDAQ:UBSH), Nu Skin Enterprises, Inc. (NYSE:NUS), Avis Budget Group Inc. (NASDAQ:CAR), and Stantec Inc. (NYSE:STN). All of these stocks' market caps match IGT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBSH,7,28413,1 NUS,23,205294,-1 CAR,28,1063531,-1 STN,5,68587,1 Average,15.75,341456,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $395 million in IGT's case. Avis Budget Group Inc. (NASDAQ:CAR) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks International Game Technology PLC (NYSE:IGT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on IGT, though not to the same extent, as the stock returned 0.8% during the same period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.