Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) was in 22 hedge funds’ portfolios at the end of the third quarter of 2018. PLAY investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 19 hedge funds in our database with PLAY positions at the end of the previous quarter. Our calculations also showed that PLAY isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s go over the key hedge fund action surrounding Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY).
How are hedge funds trading Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PLAY over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Melvin Capital Management was the largest shareholder of Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), with a stake worth $66.2 million reported as of the end of September. Trailing Melvin Capital Management was Point72 Asset Management, which amassed a stake valued at $38.2 million. Balyasny Asset Management, Maverick Capital, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the largest position in Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY). Marshall Wace LLP had $17.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $11.2 million investment in the stock during the quarter. The following funds were also among the new PLAY investors: Steve Cohen’s Point72 Asset Management, John Osterweis’s Osterweis Capital Management, and Jamie Zimmerman’s Litespeed Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) but similarly valued. We will take a look at Pandora Media Inc (NYSE:P), PotlatchDeltic Corporation (NASDAQ:PCH), Tegna Inc (NYSE:TGNA), and Viavi Solutions Inc (NASDAQ:VIAV). This group of stocks’ market caps are closest to PLAY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| P | 41 | 788940 | 6 |
| PCH | 16 | 172673 | 2 |
| TGNA | 23 | 403399 | 6 |
| VIAV | 22 | 224277 | -7 |
| Average | 25.5 | 397322 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $397 million. That figure was $249 million in PLAY’s case. Pandora Media Inc (NYSE:P) is the most popular stock in this table. On the other hand PotlatchDeltic Corporation (NASDAQ:PCH) is the least popular one with only 16 bullish hedge fund positions. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard P might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
