Here is What Hedge Funds Think About Scientific Games Corp (SGMS)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Scientific Games Corp (NASDAQ:SGMS).

Scientific Games Corp (NASDAQ:SGMS) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 24 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that SGMS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Jazz Pharmaceuticals Plc (NASDAQ:JAZZ), Ciena Corporation (NASDAQ:CIEN), and Zai Lab Limited (NASDAQ:ZLAB) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let’s take a look at the new hedge fund action regarding Scientific Games Corp (NASDAQ:SGMS).

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

At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in SGMS a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Fine Capital Partners held the most valuable stake in Scientific Games Corp (NASDAQ:SGMS), which was worth $747.6 million at the end of the third quarter. On the second spot was Stone House Capital which amassed $224.3 million worth of shares. Harvard Management Co, Nantahala Capital Management, and Park West Asset 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 Stone House Capital allocated the biggest weight to Scientific Games Corp (NASDAQ:SGMS), around 91.95% of its 13F portfolio. Fine Capital Partners is also relatively very bullish on the stock, setting aside 90.11 percent of its 13F equity portfolio to SGMS.

Judging by the fact that Scientific Games Corp (NASDAQ:SGMS) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers who were dropping their full holdings by the end of the third quarter. At the top of the heap, Mark Cohen’s Stone House Capital said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $209.1 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund sold off about $7.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Scientific Games Corp (NASDAQ:SGMS). We will take a look at Jazz Pharmaceuticals Plc (NASDAQ:JAZZ), Ciena Corporation (NASDAQ:CIEN), Zai Lab Limited (NASDAQ:ZLAB), FirstService Corporation (TSE:FSV), WEX Inc (NYSE:WEX), Gentex Corporation (NASDAQ:GNTX), and AptarGroup, Inc. (NYSE:ATR). All of these stocks’ market caps are similar to SGMS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $591 million. That figure was $1540 million in SGMS’s case. Zai Lab Limited (NASDAQ:ZLAB) is the most popular stock in this table. On the other hand FirstService Corporation (TSE:FSV) is the least popular one with only 14 bullish hedge fund positions. Scientific Games Corp (NASDAQ:SGMS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SGMS is 49.5. 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. 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 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 gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately SGMS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SGMS investors were disappointed as the stock returned -24.2% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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