Is Dover Downs Gaming & Entertainment, Inc. (DDE) Going to Burn These Hedge Funds?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Hedge fund interest in Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE) shares was flat at the end of last quarter. This is usually a negative indicator. 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 On Track Innovations Ltd. (USA) (NASDAQ:OTIV), Cogentix Medical Inc (NASDAQ:CGNT), and Summer Infant, Inc. (NASDAQ:SUMR) to gather more data points.

To the average investor, there are many indicators stock traders use to appraise publicly traded companies. Some of the most useful indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass their index-focused peers by a significant amount (see the details here).

With all of this in mind, let’s take a peek at the fresh action regarding Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE).

What does the smart money think about Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE)?

At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, flat over the second quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE), worth close to $0.3 million, comprising less than 0.1% of its total 13F portfolio. Coming in second is Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk of GRT Capital Partners, with a $0.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management, and Mario Gabelli’s GAMCO Investors.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s now review hedge fund activity in other stocks similar to Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE). We will take a look at On Track Innovations Ltd.(USA) (NASDAQ:OTIV), Cogentix Medical Inc (NASDAQ:CGNT), Summer Infant, Inc. (NASDAQ:SUMR), and RMG Networks Holding Corporation (NASDAQ:RMGN). This group of stocks’ market values resembles Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE)’s market value.

As you can see, these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $1 million in Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE)’s case. Cogentix Medical Inc (NASDAQ:CGNT) is the most popular stock in this table. On the other hand, On Track Innovations Ltd.(USA) (NASDAQ:OTIV) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Dover Downs Gaming & Entertainment, Inc. (NYSE:DDE) is even less popular than On Track Innovations Ltd.(USA) (NASDAQ:OTIV). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.