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Scientific Games (SGMS) Has Risen 80% in Last One Year, Outperforms Market

Alex Smith
·3 min read

If you are looking for the best ideas for your portfolio you may want to consider some of Greenlight Capital's top stock picks. Greenlight Capital, an investment management firm, is bullish on Scientific Games Corp (NASDAQ:SGMS) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Scientific Games Corp (NASDAQ:SGMS) stock. Scientific Games Corp (NASDAQ:SGMS) is a gambling company.

On July 25, 2019, Greenlight Capital had released its Q2 2019 investor letter. Scientific Games Corp (NASDAQ:SGMS) stock has posted a return of 80.3% in the trailing one year period, outperforming the S&P 500 Index which returned 12.6% in the same period. This suggests that the investment firm was right in its decision. On a year-to-date basis, Scientific Games Corp (NASDAQ:SGMS) stock has risen by 37.0%.

In Q2 2019 investor letter, Greenlight Capital said the fund posted a return of 5.8% in the second quarter of 2019, outperforming the S&P 500 Index which returned 4.30% in the same period. Let’s take a look at comments made by Greenlight Capital about Scientific Games Corp (NASDAQ:SGMS) stock in the Q2 2019 investor letter.

"SGMS is a gaming equipment company specializing in slot machines and instant lottery products. The company has developed thousands of games for its core business and since 2012 has monetized them via web- and mobile-based social gaming platforms. In May, SGMS publicly listed SciPlay Corporation (SCPL), its online social gaming business. Given SCPL’s access to SGMS’s content, its R&D expenses are generally lower than – and its margins higher than – its peers’. While consensus expects SCPL’s EPS to grow at an annual rate of 23% through 2022, the shares trade at only 12x the 2020 estimate. After the IPO, SGMS continues to own 82% of SCPL, which accounted for 78% of its market capitalization at quarter-end and could be spun-off in the future. At our average entry price, SGMS’s core business trades at less than 5x free cash flow. SGMS ended the quarter at $19.82."

In Q1 2020, the number of bullish hedge fund positions on Scientific Games Corp (NASDAQ:SGMS) stock decreased by about 33% from the previous quarter (see the chart here), so a number of other hedge fund managers don't seem to agree with Scientific Games' growth potential. Our calculations showed that Scientific Games Corp (NASDAQ:SGMS) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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