Was The Smart Money Right About Take-Two Interactive Software, Inc. (TTWO)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Take-Two Interactive Software, Inc. (NASDAQ:TTWO) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) investors should be aware of a decrease in support from the world’s most elite money managers of late. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) was in 53 hedge funds’ portfolios at the end of September. The all time high for this statistic is 66. Our calculations also showed that TTWO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Take-Two Interactive Software, Inc. (NASDAQ:TTWO).

Steven Cohen of Point72 Asset Management

Do Hedge Funds Think TTWO Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TTWO over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Anand Parekh’s Alyeska Investment Group has the number one position in Take-Two Interactive Software, Inc. (NASDAQ:TTWO), worth close to $136.5 million, amounting to 1.7% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $103 million call position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers with similar optimism encompass Gavin Baker’s Atreides Management, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Take-Two Interactive Software, Inc. (NASDAQ:TTWO), around 10.61% of its 13F portfolio. Tensile Capital is also relatively very bullish on the stock, dishing out 7 percent of its 13F equity portfolio to TTWO.

Since Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has experienced declining sentiment from the smart money, logic holds that there lies a certain “tier” of money managers that slashed their entire stakes last quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest investment of the 750 funds tracked by Insider Monkey, totaling about $120.4 million in stock. Gabriel Plotkin’s fund, Melvin Capital Management, also dumped its stock, about $35.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Take-Two Interactive Software, Inc. (NASDAQ:TTWO). We will take a look at NICE Ltd (NASDAQ:NICE), Companhia Paranaense de Energia – COPEL (NYSE:ELP), VICI Properties Inc. (NYSE:VICI), HEICO Corporation (NYSE:HEI), Amcor plc (NYSE:AMCR), Quest Diagnostics Incorporated (NYSE:DGX), and SS&C Technologies Holdings, Inc. (NASDAQ:SSNC). This group of stocks’ market valuations resemble TTWO’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $982 million. That figure was $1197 million in TTWO’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia – COPEL (NYSE:ELP) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is more popular among hedge funds. Our overall hedge fund sentiment score for TTWO is 77.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on TTWO as the stock returned 6% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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