Greenlight Capital, an investment management firm, released its first quarter 2024 investor letter. A copy of the letter can be downloaded here. In the first quarter, the Greenlight Capital funds returned 4.9% net of fees and expenses, compared to 10.6% for the S&P 500 index. The year’s first quarter saw a bullish market, with investors focusing on AI, cryptocurrency, and meme stocks. Despite the market’s strong performance, the long and short portfolios didn’t fare as well. The long portfolio only saw a modest increase of 2.2%, net of fees and expenses, while the single-name short portfolio broke even. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Greenlight Capital featured stocks like PENN Entertainment, Inc. (NASDAQ:PENN) in the first quarter 2024 investor letter. Headquartered in Wyomissing, Pennsylvania, PENN Entertainment, Inc. (NASDAQ:PENN) provides integrated entertainment, sports content, and casino gaming experiences. On May 7, 2024, PENN Entertainment, Inc. (NASDAQ:PENN) stock closed at $15.91 per share. One-month return of PENN Entertainment, Inc. (NASDAQ:PENN) was -6.02%, and its shares lost 37.88% of their value over the last 52 weeks. PENN Entertainment, Inc. (NASDAQ:PENN) has a market capitalization of $2.425 billion.
Greenlight Capital stated the following regarding PENN Entertainment, Inc. (NASDAQ:PENN) in its first quarter 2024 investor letter:
“We established a new medium-sized position in PENN Entertainment, Inc. (NASDAQ:PENN) at an average price of $22.69 per share, but, for reasons discussed below, the shares fell to $18.21 by quarter-end. s referenced above, we established a medium-sized position in PENN, an operator of regional casinos. PENN’s current enterprise value is just over $4.3 billion, and based on an 8-12x multiple of free cash flow, we value their land-based casinos between $4.3 billion and $7 billion. PENN also competes in online gaming, particularly sports betting, and we believe the market ascribes a substantial negative value to that effort. To be fair, the online segment has a checkered history. In 2020, PENN acquired a minority stake of Barstool Sports, and three years later agreed to purchase the rest, for a grand total of $551 million. That acquisition was a complete failure, and the company wound up abandoning the investment. It also spent $2 billion in 2021 to acquire Score Media and Gaming to establish a better online sports betting platform. Last year, it entered into a deal with ESPN to launch and operate ESPN BET.
Successful sports betting franchises can have substantial value. DraftKings is the leader and is valued at over $20 billion. Through ESPN BET, PENN aspires to achieve top-three status in the industry. Given that the market is ascribing negative value to ESPN BET, it’s fair to say that after the Barstool fiasco, investors have serious doubts about the company’s strategy and management’s competence to execute. Were the market to credit PENN with merely 15% of DraftKings’ value, that segment alone would be worth $20 per share.
PENN launched ESPN BET last November. The launch was largely successful and led them to achieve a top-three user share by adding one million customers in less than two months. This result was much better than expected and enabled PENN to project turning a profit a year earlier than its previous guidance. To accomplish this, the company spent more on upfront marketing to acquire customers than it had indicated. Though we had believed the rationale for increased spending was well understood, the market focused on the higher spend and punished the shares.”
The bright and neon lights of a glitzy casino, revealing the company’s iCasino and gaming properties.
PENN Entertainment, Inc. (NASDAQ:PENN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held PENN Entertainment, Inc. (NASDAQ:PENN) at the end of the fourth quarter which was 28 in the previous quarter.
We previously discussed PENN Entertainment, Inc. (NASDAQ:PENN) in another article, where we shared the list of biggest sports betting companies in the US. Baron Growth Fund commented about PENN Entertainment, Inc. (NASDAQ:PENN) in its Q2 2023 investor letter. The letter stated that that the company declined during the quarter due to recession concerns. However, Greenlight Capital is confident about PENN Entertainment, Inc.’s (NASDAQ:PENN) new deal with ESPN. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
