Recession Concerns Hurt PENN Entertainment (PENN) in 2022

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Baron Funds, an investment management company, released its “Baron Focused Growth Fund” fourth quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund (Institutional Shares) decreased by 4.52%, compared to a 4.72% rise for the Russell 2500 Growth Index and a 7.56% increase for the S&P 500 Index. For the full year, the fund trailed the primary benchmark the Russell 2500 Growth index and declined 28.14%. In addition, please check the fund’s top five holdings to know its best picks in 2022.

Baron Focused Growth Fund highlighted stocks like PENN Entertainment, Inc. (NASDAQ:PENN) in the Q4 2022 investor letter. Headquartered in Wyomissing, Pennsylvania, PENN Entertainment, Inc. (NASDAQ:PENN) is an entertainment company. On March 3, 2023, PENN Entertainment, Inc. (NASDAQ:PENN) stock closed at $31.16 per share. One-month return of PENN Entertainment, Inc. (NASDAQ:PENN) was -9.31%, and its shares lost 32.77% of their value over the last 52 weeks. PENN Entertainment, Inc. (NASDAQ:PENN) has a market capitalization of $4.91 billion.

Baron Focused Growth Fund made the following comment about PENN Entertainment, Inc. (NASDAQ:PENN) in its Q4 2022 investor letter:

“Shares of gaming company PENN Entertainment, Inc. (NASDAQ:PENN) declined 42.7% in 2022 and penalized performance by 110 bps. This was due to investor concerns about a potential recession. Thus far, the company has seen no material change to visitation or spending levels. PENN is generating strong cash flow, which it continues to use to invest in its digital growth opportunity, while using excess cash to buy back its stock. PENN is well positioned to weather a slowdown or recession, and we believe that if one does occur, the company would likely still generate revenue and EBITDA above pre-pandemic levels. We regard the $80 million of startup costs in 2022 from its digital business to be modest in relation to PENN’s over $1 billion of EBITDA casino earnings. The losses from its digital business represent customer acquisition costs incurred as additional states legalize online gambling. Since it is far less expensive to retain existing customers than to acquire new ones, we expect marketing costs to decline as PENN builds its customer base. PENN’s core bricks and mortar casino businesses remain strong. Its healthy regional casino business and strong balance sheet should enable it to continue to easily absorb its digital losses whether or not a recession should occur.”

PENN Entertainment, Inc. (NASDAQ:PENN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held PENN Entertainment, Inc. (NASDAQ:PENN) at the end of the fourth quarter which was 30 in the previous quarter.

We discussed PENN Entertainment, Inc. (NASDAQ:PENN) in another article and shared the list of best sin stocks to buy in 2023. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.


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Disclosure: None. This article is originally published at Insider Monkey.