Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to King Digital Entertainment PLC (NYSE:KING) changed recently.
Is King Digital Entertainment PLC a buy here? Prominent investors are becoming less confident. The number of bullish hedge fund positions were trimmed by 6 lately. KING was in 18 hedge funds’ portfolios at the end of the third quarter of 2015. There were 24 hedge funds in our database with KING positions at the end of the previous quarter. At the end of this article we will also compare KING to other stocks including Orbital ATK Inc (NYSE:OA), ICON plc – Ordinary Shares (NASDAQ:ICLR), and Core Laboratories N.V. (NYSE:CLB) to get a better sense of its popularity.
Follow King Digital Entertainment Plc (NYSE:KING)
Follow King Digital Entertainment Plc (NYSE:KING)
Keeping this in mind, we’re going to view the new action encompassing King Digital Entertainment PLC (NYSE:KING).
How are hedge funds trading King Digital Entertainment PLC (NYSE:KING)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Robert Pitts’s Steadfast Capital Management has the most valuable position in King Digital Entertainment PLC (NYSE:KING), worth close to $132.1 million, accounting for 2.6% of its total 13F portfolio. Sitting at the No. 2 spot is Alyeska Investment Group, led by Anand Parekh, holding a $49.9 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions consist of Philippe Laffont’s Coatue Management, D E Shaw and Patrik Brummer’s Zenit Asset Management AB.
Judging by the fact that King Digital Entertainment PLC (NYSE:KING) has witnessed a declination in interest from the smart money, logic holds that there is a sect of hedge funds that elected to cut their positions entirely last quarter. Intriguingly, Robert Pitts’s Steadfast Capital Management dumped the biggest stake of all the hedgies watched by Insider Monkey, worth an estimated $36.9 million in stock. Josh Resnick’s fund, Jericho Capital Asset Management, also cut its stock, about $12.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 6 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as King Digital Entertainment PLC (NYSE:KING) but similarly valued. These stocks are Orbital ATK Inc (NYSE:OA), ICON plc – Ordinary Shares (NASDAQ:ICLR), Core Laboratories N.V. (NYSE:CLB), and Commerce Bancshares, Inc. (NASDAQ:CBSH). All of these stocks’ market caps are similar to KING’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OA | 33 | 756743 | 3 |
| ICLR | 27 | 223656 | 4 |
| CLB | 21 | 134767 | -7 |
| CBSH | 10 | 59897 | 1 |
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $294 million. That figure was $304 million in KING’s case. Orbital ATK Inc (NYSE:OA) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 10 bullish hedge fund positions. King Digital Entertainment PLC (NYSE:KING) 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. In this regard OA might be a better candidate to consider a long position.
