Were Hedge Funds Right About Take-Two Interactive Software, Inc. (TTWO)?

At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not Take-Two Interactive Software, Inc. (NASDAQ:TTWO) makes for a good investment right now.

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) investors should pay attention to an increase in support from the world’s most elite money managers lately. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) was in 55 hedge funds’ portfolios at the end of the second quarter of 2021. 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 Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. 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 homepage. Now we’re going to view the new hedge fund action surrounding Take-Two Interactive Software, Inc. (NASDAQ:TTWO).

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

At the end of the second quarter, a total of 55 of the hedge funds tracked by Insider Monkey were long this stock, a change of 34% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TTWO over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Holocene Advisors was the largest shareholder of Take-Two Interactive Software, Inc. (NASDAQ:TTWO), with a stake worth $124 million reported as of the end of June. Trailing Holocene Advisors was Arrowstreet Capital, which amassed a stake valued at $120.4 million. Citadel Investment Group, Millennium Management, and Renaissance Technologies 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 Marlowe Partners allocated the biggest weight to Take-Two Interactive Software, Inc. (NASDAQ:TTWO), around 7.98% of its 13F portfolio. Tensile Capital is also relatively very bullish on the stock, earmarking 6.72 percent of its 13F equity portfolio to TTWO.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Take-Two Interactive Software, Inc. (NASDAQ:TTWO). Balyasny Asset Management had $41.3 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $35.4 million investment in the stock during the quarter. The following funds were also among the new TTWO investors: Jack Woodruff’s Candlestick Capital Management, James Parsons’s Junto Capital Management, and James Crichton’s Hitchwood Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Take-Two Interactive Software, Inc. (NASDAQ:TTWO). We will take a look at Steris Plc (NYSE:STE), Trimble Inc. (NASDAQ:TRMB), Ingersoll Rand Inc. (NYSE:IR), Ameren Corporation (NYSE:AEE), Fox Corporation (NASDAQ:FOX), ZoomInfo Technologies Inc. (NASDAQ:ZI), and Logitech International SA (NASDAQ:LOGI). This group of stocks’ market valuations are similar to TTWO’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $922 million. That figure was $1314 million in TTWO’s case. Steris Plc (NYSE:STE) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 20 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 85. 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 gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Unfortunately TTWO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TTWO were disappointed as the stock returned 2.2% since the end of the second quarter (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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