Hedge Funds Have Never Been This Bullish On Inspired Entertainment, Inc. (INSE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider Inspired Entertainment, Inc. (NASDAQ:INSE) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Inspired Entertainment, Inc. (NASDAQ:INSE) investors should be aware of an increase in support from the world’s most elite money managers recently. Inspired Entertainment, Inc. (NASDAQ:INSE) was in 23 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that INSE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 79 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.

J. Carlo Cannell of Cannell Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a gander at the key hedge fund action surrounding Inspired Entertainment, Inc. (NASDAQ:INSE).

Do Hedge Funds Think INSE Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 188% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards INSE over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, HG Vora Capital Management held the most valuable stake in Inspired Entertainment, Inc. (NASDAQ:INSE), which was worth $34.4 million at the end of the second quarter. On the second spot was 683 Capital Partners which amassed $22 million worth of shares. DG Capital Management, Ophir Asset Management, and Cannell Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Gratia Capital allocated the biggest weight to Inspired Entertainment, Inc. (NASDAQ:INSE), around 5.23% of its 13F portfolio. DG Capital Management is also relatively very bullish on the stock, designating 3.01 percent of its 13F equity portfolio to INSE.

As industrywide interest jumped, specific money managers have jumped into Inspired Entertainment, Inc. (NASDAQ:INSE) headfirst. DG Capital Management, managed by Dov Gertzulin, created the largest position in Inspired Entertainment, Inc. (NASDAQ:INSE). DG Capital Management had $14 million invested in the company at the end of the quarter. J. Carlo Cannell’s Cannell Capital also made a $9.5 million investment in the stock during the quarter. The other funds with brand new INSE positions are Brett Hendrickson’s Nokomis Capital, Steve Pei’s Gratia Capital, and Warren Lammert’s Granite Point Capital.

Let’s also examine hedge fund activity in other stocks similar to Inspired Entertainment, Inc. (NASDAQ:INSE). These stocks are Ring Energy Inc (NYSE:REI), Arbutus Biopharma Corp (NASDAQ:ABUS), Western Copper and Gold Corporation (NYSE:WRN), Aenza S.A.A. (NYSE:AENZ), Tuniu Corporation (NASDAQ:TOUR), Nathan’s Famous, Inc. (NASDAQ:NATH), and G. Willi-Food International Limited (NASDAQ:WILC). This group of stocks’ market values are similar to INSE’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $121 million in INSE’s case. Ring Energy Inc (NYSE:REI) is the most popular stock in this table. On the other hand Aenza S.A.A. (NYSE:AENZ) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Inspired Entertainment, Inc. (NASDAQ:INSE) is more popular among hedge funds. Our overall hedge fund sentiment score for INSE is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24% in 2021 through October 22nd but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on INSE as the stock returned 7.1% since the end of June (through 10/22) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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