Hedge Funds Never Been Less Bullish On Dave & Buster’s Entertainment, Inc. (PLAY)

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 at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) and determine whether the smart money was really smart about this stock.

Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that PLAY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are viewed as worthless, outdated financial tools of the past. While there are more than 8000 funds trading at the moment, Our researchers choose to focus on the upper echelon of this club, approximately 850 funds. It is estimated that this group of investors manage most of all hedge funds’ total capital, and by watching their matchless equity investments, Insider Monkey has determined a few investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Charles Davidson of Wexford Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the fresh hedge fund action encompassing Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY).

What does smart money think about Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)?

At Q1’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -37% from the fourth quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in PLAY a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Hill Path Capital was the largest shareholder of Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), with a stake worth $28.1 million reported as of the end of September. Trailing Hill Path Capital was Eminence Capital, which amassed a stake valued at $22 million. MIC Capital Partners, Arrowstreet Capital, and Winton Capital Management 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 Hill Path Capital allocated the biggest weight to Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), around 8.57% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, setting aside 3.49 percent of its 13F equity portfolio to PLAY.

Because Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers that slashed their positions entirely last quarter. At the top of the heap, Doug Silverman and Alexander Klabin’s Senator Investment Group dumped the largest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $60.3 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $8.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY). We will take a look at Xenon Pharmaceuticals Inc (NASDAQ:XENE), Maverix Metals Inc. (NYSE:MMX), Byline Bancorp, Inc. (NYSE:BY), and Verso Corporation (NYSE:VRS). This group of stocks’ market caps are closest to PLAY’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $75 million in PLAY’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand Maverix Metals Inc. (NYSE:MMX) is the least popular one with only 3 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately PLAY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PLAY investors were disappointed as the stock returned 1.9% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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