At Insider Monkey we follow around 700 of the best-performing investors and even though many of them lost money in the last couple of months (70% of hedge funds lost money in October whereas S&P 500 ETF lost about 7%), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has experienced an increase in support from the world’s most elite money managers in recent months. TTWO was in 58 hedge funds’ portfolios at the end of the third quarter of 2018. There were 56 hedge funds in our database with TTWO positions at the end of the previous quarter. Our calculations also showed that TTWO isn’t among the 30 most popular stocks among hedge funds. Margate Capital said the following about TTWO in its Q3 investor letter:
“TTWO’s fiscal Q1 results/guidance which demonstrated a significant acceleration in TTWO’s recurring consumer spend even against an extremely difficult comparison; (2) enthusiasm building into TTWO’s October release of Red Dead Redemption 2, and (3) TTWO’s NBA2K 19 game was released in September to significantly higher yearover-year metacritic ratings. Take-Two is a video game developer that creates console-based video games at its studios Rockstar Games and 2K. We wrote in detail on our video games sector thesis and TTWO specifically in our Q2 letter”
Why do we pay any attention at all to hedge fund sentiment? 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a glance at the new hedge fund action surrounding Take-Two Interactive Software, Inc. (NASDAQ:TTWO).
What does the smart money think about Take-Two Interactive Software, Inc. (NASDAQ:TTWO)?
At the end of the third quarter, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TTWO over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Jericho Capital Asset Management, managed by Josh Resnick, created the most outsized position in Take-Two Interactive Software, Inc. (NASDAQ:TTWO). Jericho Capital Asset Management had $136.2 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $78.4 million investment in the stock during the quarter. The following funds were also among the new TTWO investors: Brandon Haley’s Holocene Advisors, John Hurley’s Cavalry Asset Management, and Bruce Garelick’s Garelick Capital Partners.
Let’s go over hedge fund activity in other stocks similar to Take-Two Interactive Software, Inc. (NASDAQ:TTWO). We will take a look at Maxim Integrated Products Inc. (NASDAQ:MXIM), Host Hotels and Resorts Inc (NYSE:HST), First Republic Bank (NYSE:FRC), and Fortinet Inc (NASDAQ:FTNT). This group of stocks’ market valuations are similar to TTWO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MXIM | 30 | 579428 | 5 |
| HST | 21 | 383143 | 0 |
| FRC | 23 | 724485 | 6 |
| FTNT | 28 | 1046841 | 2 |
| Average | 25.5 | 683474 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $683 million. That figure was $2.34 billion in TTWO’s case. Maxim Integrated Products Inc. (NASDAQ:MXIM) is the most popular stock in this table. On the other hand Host Hotels and Resorts Inc (NYSE:HST) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Take-Two Interactive Software, Inc. (NASDAQ:TTWO) 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.
Disclosure: None. This article was originally published at Insider Monkey.
