Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Gaming and Leisure Properties Inc (NASDAQ:GLPI) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Gaming and Leisure Properties Inc (NASDAQ:GLPI) was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. GLPI has experienced a decrease in support from the world’s most elite money managers in recent months. There were 35 hedge funds in our database with GLPI holdings at the end of the previous quarter. Our calculations also showed that GLPI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jeffrey Gates of Gates Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the key hedge fund action regarding Gaming and Leisure Properties Inc (NASDAQ:GLPI).
What does smart money think about Gaming and Leisure Properties Inc (NASDAQ:GLPI)?
Heading into the first quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GLPI over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Gaming and Leisure Properties Inc (NASDAQ:GLPI) was held by Renaissance Technologies, which reported holding $291.9 million worth of stock at the end of September. It was followed by Gates Capital Management with a $125.1 million position. Other investors bullish on the company included Land & Buildings Investment Management, Citadel Investment Group, and Cardinal Capital. In terms of the portfolio weights assigned to each position Land & Buildings Investment Management allocated the biggest weight to Gaming and Leisure Properties Inc (NASDAQ:GLPI), around 17.07% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, setting aside 13.05 percent of its 13F equity portfolio to GLPI.
Judging by the fact that Gaming and Leisure Properties Inc (NASDAQ:GLPI) has experienced declining sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of fund managers that elected to cut their full holdings by the end of the third quarter. Interestingly, Eduardo Abush’s Waterfront Capital Partners said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $17 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also said goodbye to its stock, about $1.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 6 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Gaming and Leisure Properties Inc (NASDAQ:GLPI). These stocks are ICON Public Limited Company (NASDAQ:ICLR), Hyatt Hotels Corporation (NYSE:H), National Retail Properties, Inc. (NYSE:NNN), and US Foods Holding Corp. (NYSE:USFD). This group of stocks’ market values are closest to GLPI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICLR | 19 | 646835 | -5 |
| H | 27 | 1152600 | -4 |
| NNN | 23 | 276082 | 2 |
| USFD | 37 | 1278945 | -9 |
| Average | 26.5 | 838616 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $839 million. That figure was $851 million in GLPI’s case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand ICON Public Limited Company (NASDAQ:ICLR) is the least popular one with only 19 bullish hedge fund positions. Gaming and Leisure Properties Inc (NASDAQ:GLPI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately GLPI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GLPI were disappointed as the stock returned -53.9% during the same time 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
