Century Casinos, Inc. (CNTY): Are Hedge Funds Right About This Stock?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Century Casinos, Inc. (NASDAQ:CNTY).

Century Casinos, Inc. (NASDAQ:CNTY) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the third quarter of 2016. At the end of this article we will also compare CNTY to other stocks including Mediwound Ltd (NASDAQ:MDWD), PFSweb, Inc. (NASDAQ:PFSW), and Jamba, Inc. (NASDAQ:JMBA) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Now, we’re going to analyze the new action surrounding Century Casinos, Inc. (NASDAQ:CNTY).

How are hedge funds trading Century Casinos, Inc. (NASDAQ:CNTY)?

Heading into the fourth quarter of 2016, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 8 hedge funds with a bullish position in CNTY at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John W. Rogers’ Ariel Investments has the most valuable position in Century Casinos, Inc. (NASDAQ:CNTY), worth close to $25.7 million, accounting for 0.3% of its total 13F portfolio. On Ariel Investments’s heels is Chuck Royce of Royce & Associates, with a $5.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Renaissance Technologies, one of the largest hedge funds in the world, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Earlier we told you that the aggregate hedge fund interest in Century Casinos, Inc. (NASDAQ:CNTY) was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s go over hedge fund activity in other stocks similar to Century Casinos, Inc. (NASDAQ:CNTY). We will take a look at Mediwound Ltd (NASDAQ:MDWD), PFSweb, Inc. (NASDAQ:PFSW), Jamba, Inc. (NASDAQ:JMBA), and Maxwell Technologies Inc. (NASDAQ:MXWL). This group of stocks’ market caps resemble CNTY’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $36 million in CNTY’s case. PFSweb, Inc. (NASDAQ:PFSW) is the most popular stock in this table. On the other hand Maxwell Technologies Inc. (NASDAQ:MXWL) is the least popular one with only 4 bullish hedge fund positions. Century Casinos, Inc. (NASDAQ:CNTY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PFSW might be a better candidate to consider taking a long position in.

Disclosure: none.