Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Is The Stars Group Inc. (NASDAQ:TSG) the right investment to pursue these days? Prominent investors are getting less optimistic. The number of long hedge fund positions were cut by 12 lately. Our calculations also showed that TSG isn’t among the 30 most popular stocks among hedge funds.
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’ 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 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a gander at the latest hedge fund action surrounding The Stars Group Inc. (NASDAQ:TSG).
How have hedgies been trading The Stars Group Inc. (NASDAQ:TSG)?
At the end of the fourth quarter, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in TSG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Tiger Legatus Capital was the largest shareholder of The Stars Group Inc. (NASDAQ:TSG), with a stake worth $88.8 million reported as of the end of September. Trailing Tiger Legatus Capital was Odey Asset Management Group, which amassed a stake valued at $78 million. Indus Capital, BeaconLight Capital, and Cumberland Associates / Springowl Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Because The Stars Group Inc. (NASDAQ:TSG) has faced falling interest from the smart money, logic holds that there exists a select few hedge funds that decided to sell off their full holdings in the third quarter. Interestingly, Matthew Sidman’s Three Bays Capital sold off the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $51.5 million in stock. Parag Vora’s fund, HG Vora Capital Management, also dropped its stock, about $49.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 12 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Stars Group Inc. (NASDAQ:TSG) but similarly valued. We will take a look at Wyndham Hotels & Resorts, Inc. (NYSE:WH), Cameco Corporation (NYSE:CCJ), SAGE Therapeutics Inc (NASDAQ:SAGE), and MongoDB, Inc. (NASDAQ:MDB). This group of stocks’ market values are similar to TSG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WH | 37 | 834677 | -2 |
| CCJ | 24 | 346331 | 5 |
| SAGE | 29 | 330966 | -8 |
| MDB | 23 | 510104 | 2 |
| Average | 28.25 | 505520 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $506 million. That figure was $583 million in TSG’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand MongoDB, Inc. (NASDAQ:MDB) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks The Stars Group Inc. (NASDAQ:TSG) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately TSG wasn’t nearly as popular as these 15 stock and hedge funds that were betting on TSG were disappointed as the stock returned 15.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
