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Were Hedge Funds Right About Flocking Into PlayAGS, Inc. (AGS) ?

Nina Todic

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and optimism towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the first quarter and hedging or reducing many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding PlayAGS, Inc. (NYSE:AGS).

PlayAGS, Inc. (NYSE:AGS) was in 22 hedge funds' portfolios at the end of March. AGS investors should be aware of an increase in hedge fund interest lately. There were 11 hedge funds in our database with AGS holdings at the end of the previous quarter. Our calculations also showed that ags isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Driehaus

Let's take a gander at the fresh hedge fund action encompassing PlayAGS, Inc. (NYSE:AGS).

What does the smart money think about PlayAGS, Inc. (NYSE:AGS)?

At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in AGS a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AGS Positions

More specifically, Park West Asset Management was the largest shareholder of PlayAGS, Inc. (NYSE:AGS), with a stake worth $41.6 million reported as of the end of March. Trailing Park West Asset Management was Marshall Wace LLP, which amassed a stake valued at $20.2 million. Millennium Management, Driehaus Capital, and Stormborn Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most outsized position in PlayAGS, Inc. (NYSE:AGS). Marshall Wace LLP had $20.2 million invested in the company at the end of the quarter. Jim Simons's Renaissance Technologies also initiated a $4.3 million position during the quarter. The other funds with brand new AGS positions are Joseph Samuels's Islet Management, Benjamin A. Smith's Laurion Capital Management, and David Rodriguez-Fraile's BlueMar Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PlayAGS, Inc. (NYSE:AGS) but similarly valued. These stocks are QAD Inc. (NASDAQ:QADA), CBTX, Inc. (NASDAQ:CBTX), Intrexon Corp (NASDAQ:XON), and Jianpu Technology Inc. (NYSE:JT). All of these stocks' market caps are similar to AGS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QADA,16,124879,-1 CBTX,8,22427,0 XON,8,11013,-2 JT,7,44007,2 Average,9.75,50582,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $130 million in AGS's case. QAD Inc. (NASDAQ:QADA) is the most popular stock in this table. On the other hand Jianpu Technology Inc. (NYSE:JT) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks PlayAGS, Inc. (NYSE:AGS) 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. Unfortunately AGS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AGS were disappointed as the stock returned -20.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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