Is Electronic Arts Inc. (EA) a Good Stock To Buy?

The market has been volatile due to elections and the potential of another Federal Reserve rate increase. Small cap stocks have been on a tear, as the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. SEC filings and hedge fund investor letters indicate that the smart money seems to be getting back in stocks, and the funds’ movements is one of the reasons why small-cap stocks are red hot. In this article, we will analyze what the smart money thinks of Electronic Arts Inc. (NASDAQ:EA) and find out how it is affected by hedge funds’ moves.

So, is Electronic Arts Inc. (NASDAQ:EA) a bargain? Hedge funds are turning bullish, as the number of bullish hedge fund positions went up by three recently. Nevertheless, 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 Koninklijke Philips Electronics NV (ADR) (NYSE:PHG), Xcel Energy Inc (NYSE:XEL), and Ross Stores, Inc. (NASDAQ:ROST) to gather more data points.

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Keeping this in mind, we’re going to analyze the new action surrounding Electronic Arts Inc. (NASDAQ:EA).

How are hedge funds trading Electronic Arts Inc. (NASDAQ:EA)?

Heading into the fourth quarter of 2016, a total of 61 funds tracked by Insider Monkey were bullish on this stock, up by 5% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Lone Pine Capital, managed by Stephen Mandel, holds the number one position in Electronic Arts Inc. (NASDAQ:EA). Lone Pine Capital has a $736.1 million position in the stock, comprising 3.3% of its 13F portfolio. Sitting at the No. 2 spot is Philippe Laffont’s Coatue Management, which holds a $394.3 million position; the fund has 4.8% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Panayotis Takis Sparaggis’ Alkeon Capital Management and Alexander Mitchell’s Scopus Asset Management.

Now, key money managers have jumped into Electronic Arts Inc. (NASDAQ:EA) headfirst. Jericho Capital Asset Management, managed by Josh Resnick, initiated the biggest position in Electronic Arts Inc. (NASDAQ:EA). Jericho Capital Asset Management had $211.2 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $68.3 million investment in the stock during the quarter. The following funds were also among the new EA investors: Edmond M. Safra’s EMS Capital, Zach Schreiber’s Point State Capital, and Leon Shaulov’s Maplelane Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Electronic Arts Inc. (NASDAQ:EA) but similarly valued. We will take a look at Koninklijke Philips Electronics NV (ADR) (NYSE:PHG), Xcel Energy Inc (NYSE:XEL), Ross Stores, Inc. (NASDAQ:ROST), and Hilton Worldwide Holdings Inc (NYSE:HLT). This group of stocks’ market values match EA’s market value.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1.14 billion. That figure was $3.01 billion in EA’s case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table with 39 investors holding shares. On the other hand Koninklijke Philips Electronics NV (ADR) (NYSE:PHG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Electronic Arts Inc. (NASDAQ:EA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.