Hedge Funds Are Selling Penn National Gaming, Inc (PENN)

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Penn National Gaming, Inc (NASDAQ:PENN) from the perspective of those successful funds.

Penn National Gaming, Inc (NASDAQ:PENN) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. PENN was in 26 hedge funds’ portfolios at the end of September. There were 27 hedge funds in our database with PENN positions at the end of the previous quarter. At the end of this article we will also compare PENN to other stocks including Popeyes Louisiana Kitchen Inc (NASDAQ:PLKI), BancFirst Corporation (NASDAQ:BANF), and First Bancorp (NYSE:FBP) 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.

What does the smart money think about Penn National Gaming, Inc (NASDAQ:PENN)?

At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 4% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in PENN 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.

When looking at the institutional investors followed by Insider Monkey, Dmitry Balyasny’s Balyasny Asset Management has the number one position in Penn National Gaming, Inc (NASDAQ:PENN), worth close to $51.8 million. The second most bullish fund manager is Parag Vora of HG Vora Capital Management, with a $45.5 million position; the fund has 5.9% of its 13F portfolio invested in the stock. Other peers that are bullish contain Paul Reeder and Edward Shapiro’s PAR Capital Management, Jim Simons’ Renaissance Technologies and Steven Tananbaum’s GoldenTree Asset Management. 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.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. It’s worth mentioning that Jacob Doft’s Highline Capital Management dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $20.4 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also cut its stock, about $6 million worth.

Let’s check out hedge fund activity in other stocks similar to Penn National Gaming, Inc (NASDAQ:PENN). We will take a look at Popeyes Louisiana Kitchen Inc (NASDAQ:PLKI), BancFirst Corporation (NASDAQ:BANF), First Bancorp (NYSE:FBP), and Installed Building Products Inc (NYSE:IBP). This group of stocks’ market values are closest to PENN’s market value.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $327 million in PENN’s case. First Bancorp (NYSE:FBP) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Penn National Gaming, Inc (NASDAQ:PENN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None