Hedge Funds Are Dumping CEC Entertainment, Inc. (CEC)

Is CEC Entertainment, Inc. (NYSE:CEC) a worthy investment today? The smart money is in a bearish mood. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience

In the eyes of most investors, hedge funds are viewed as slow, old investment tools of the past. While there are greater than 8000 funds in operation at present, we look at the moguls of this group, about 450 funds. Most estimates calculate that this group has its hands on the lion’s share of the smart money’s total asset base, and by keeping an eye on their highest performing investments, we have found a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as beneficial, bullish insider trading activity is a second way to parse down the world of equities. Obviously, there are plenty of stimuli for an upper level exec to drop shares of his or her company, but just one, very obvious reason why they would buy. Plenty of academic studies have demonstrated the valuable potential of this strategy if piggybackers know where to look (learn more here).

With all of this in mind, let’s take a gander at the key action regarding CEC Entertainment, Inc. (NYSE:CEC).

Hedge fund activity in CEC Entertainment, Inc. (NYSE:CEC)

Heading into Q2, a total of 9 of the hedge funds we track were bullish in this stock, a change of 0% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially.

Of the funds we track, David Dreman’s Dreman Value Management had the largest position in CEC Entertainment, Inc. (NYSE:CEC), worth close to $8.3 million, accounting for 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $6.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include Boaz Weinstein’s Saba Capital, Jim Simons’s Renaissance Technologies and Ken Griffin’s Citadel Investment Group.

Because CEC Entertainment, Inc. (NYSE:CEC) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few funds that decided to sell off their full holdings in Q1. Interestingly, Paul Tudor Jones’s Tudor Investment Corp said goodbye to the biggest investment of all the hedgies we track, comprising an estimated $0.2 million in stock.. Ken Griffin’s fund, Citadel Investment Group, also dumped its call options., about $0.1 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with CEC Entertainment, Inc. (NYSE:CEC)?

Insider trading activity, especially when it’s bullish, is most useful when the company in question has experienced transactions within the past 180 days. Over the latest 180-day time frame, CEC Entertainment, Inc. (NYSE:CEC) has experienced 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to CEC Entertainment, Inc. (NYSE:CEC). These stocks are Biglari Holdings Inc (NYSE:BH), Denny’s Corporation (NASDAQ:DENN), Chuy’s Holdings Inc (NASDAQ:CHUY), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), and Fiesta Restaurant Group Inc (NASDAQ:FRGI). This group of stocks are in the restaurants industry and their market caps resemble CEC’s market cap.