Was The Smart Money Right About Gaming and Leisure Properties Inc (GLPI)?

In this article you are going to find out whether hedge funds think Gaming and Leisure Properties Inc (NASDAQ:GLPI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Gaming and Leisure Properties Inc (NASDAQ:GLPI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. Our calculations also showed that GLPI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare GLPI to other stocks including Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Ally Financial Inc (NYSE:ALLY), and Credit Acceptance Corp. (NASDAQ:CACC) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Jeffrey Gates of Gates Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 biggest telecom companies to identify fast growing companies in various industries. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a glance at the recent hedge fund action regarding Gaming and Leisure Properties Inc (NASDAQ:GLPI).

How are hedge funds trading Gaming and Leisure Properties Inc (NASDAQ:GLPI)?

At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2020. On the other hand, there were a total of 27 hedge funds with a bullish position in GLPI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Gaming and Leisure Properties Inc (NASDAQ:GLPI), which was worth $150.6 million at the end of the third quarter. On the second spot was Gates Capital Management which amassed $103.7 million worth of shares. Cardinal Capital, Two Sigma Advisors, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to Gaming and Leisure Properties Inc (NASDAQ:GLPI), around 5.19% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, designating 5.1 percent of its 13F equity portfolio to GLPI.

Seeing as Gaming and Leisure Properties Inc (NASDAQ:GLPI) has experienced bearish sentiment from the smart money, logic holds that there were a few fund managers that slashed their entire stakes by the end of the second quarter. Interestingly, Ricky Sandler’s Eminence Capital dropped the largest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $29.1 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $26.3 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Gaming and Leisure Properties Inc (NASDAQ:GLPI). These stocks are Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Ally Financial Inc (NYSE:ALLY), Credit Acceptance Corp. (NASDAQ:CACC), Livongo Health, Inc. (NASDAQ:LVGO), Formula One Group (NASDAQ:FWONK), WestRock Company (NYSE:WRK), and BorgWarner Inc. (NYSE:BWA). This group of stocks’ market caps are similar to GLPI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $891 million. That figure was $499 million in GLPI’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Credit Acceptance Corp. (NASDAQ:CACC) is the least popular one with only 23 bullish hedge fund positions. Gaming and Leisure Properties Inc (NASDAQ:GLPI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GLPI is 42.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on GLPI, though not to the same extent, as the stock returned 6.7% since the end of Q2 (through October 30th) and outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.