GameStop Corp. (NYSE:GME) shares are down by nearly 6% today after the interactive entertainment retailer reported earnings of $0.66 per share on revenue of $1.97 billion, topping EPS estimates of $0.61, and meeting sales estimates of $1.97 billion. Comparable-store sales retreated by 6.2% year-over-year, due in part to the company’s new video game hardware segment sales falling by 29% year-over-year, being impacted by no new hardware releases. Management sees more of the same for the second quarter, with comparable-store sales expected to retreat by 4%-to-7% and EPS expected to be $0.23-to-$0.30, below estimates of $0.31. For the full year, management expects EPS of $3.90-to-$4.05, which is still in-line with the consensus of $4.00 per share.
At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in small-cap stocks like GameStop.
GameStop Corp. (NYSE:GME) was in 32 hedge funds’ portfolios at the end of March. GME investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 36 hedge funds in our database with GME holdings at the end of the prior quarter. At the end of this article we will also compare GME to other stocks including Air Lease Corp (NYSE:AL), Hill-Rom Holdings, Inc. (NYSE:HRC), and American Homes 4 Rent (NYSE:AMH) to get a better sense of its popularity.
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Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in GameStop Corp. (NYSE:GME). AQR Capital Management has a $66.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Tiger Global Management LLC, led by Chase Coleman, holding a $55.5 million position; 0.8% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism comprise Ross Margolies’ Stelliam Investment Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and David Harding’s Winton Capital Management.
On the next page we’ll look at some funds that sold off positions in GameStop during Q1, as well as compare the stock to a handful of others with similar market caps.
Because GameStop Corp. (NYSE:GME) has experienced bearish sentiment from hedge fund managers, we can see that there were a few fund managers who sold off their positions entirely by the end of the first quarter. It’s worth mentioning that Glenn Russell Dubin’s Highbridge Capital Management said goodbye to the biggest position of the 760 funds followed by Insider Monkey, valued at about $5.2 million in stock, while Constantinos J. Christofilis’s Archon Capital Management was right behind this move, as the fund cut about $4.1 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as GameStop Corp. (NYSE:GME) but similarly valued. We will take a look at Air Lease Corp (NYSE:AL), Hill-Rom Holdings, Inc. (NYSE:HRC), American Homes 4 Rent (NYSE:AMH), and Webster Financial Corporation (NYSE:WBS). This group of stocks’ market caps are similar to GME’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AL | 23 | 294294 | -3 |
| HRC | 28 | 443867 | 3 |
| AMH | 17 | 526535 | 3 |
| WBS | 15 | 352222 | -4 |
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $404 million. That figure was $391 million in GME’s case. Hill-Rom Holdings, Inc. (NYSE:HRC) is the most popular stock in this table. On the other hand Webster Financial Corporation (NYSE:WBS) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks GameStop Corp. (NYSE:GME) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio on the dip.
Disclosure: None
