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Pinnacle Entertainment, Layne Christensen: Highlights From Hedge Funds’ Latest Filings

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At Insider Monkey we try to keep a close watch on various filings with the Securities and Exchange Commission in order to follow the moves of over 730 hedge funds that we track. This helps us to identify stocks in which these fund managers are investing. The reason we do this is simple. Hedge funds have billions of dollars that they have to invest, therefore if a manager decides to invest a large amount of money in a company, he spends a lot of time and money researching the stock. Another advantage when you want want to invest a large amount of cash in a company is that you can meet with the management and the board of the company and see the company from a bit different angle that it is presented by the media, analyts and publicly-available information. However, in exchange for their hard work, hedge fund managers tend to receive high fees of around 30% of their funds’ total returns.

Christian Leone

These fees are not always justified as we can see from the fact that between 2012 and 2014, equity hedge funds returned 4.8%, 11.1% and 1.4% respectively. Partially this underperformance is explained by the fact that many hedge funds invest mostly in large and mega-cap stocks, like Apple, Google or Facebook. However, when we tested a portfolio of 50 most popular stocks among hedge funds between 1999 and 2012, we discovered that it underperformed the S&P 500 ETF (SPY) by around 7 basis points per month. Nevertheless, following the activity of hedge funds can provide some profitable insight if we approach it from another level, particularly, by identifying most popular small-cap picks. In this way, our small-cap hedge fund strategy provided impressive returns of 28.2% in 2014, 53.2% in 2013, and 33.3% in 2012. Without any further ado, let’s take a look at some of the latest moves revealed by the funds that we track via filings with the Securities and Exchange Commission.

The first move that we would like to mention is Canyon Advisor raising its stake in Pinnacle Entertainment, Inc (NYSE:PNK). The fund led by Joshua Friedman and Mitchell Julis raised its stake to 3.55 million shares, representing 5.89% of the outstanding common stock, versus 2.77 million shares held earlier. The fund raised its stake for obvious reasons, the same for which Pinnacle Entertainment, Inc (NYSE:PNK) has been in the news for the last couple of days. On March 9, Gaming and Leisure Properties Inc (NASDAQ:GLPI) made an unsolicited bid to purchase the real estate assets of Pinnacle Entertainment for $4.1 billion. Yesterday, another investor of Pinnacle Entertainment, Inc (NYSE:PNK), Daniel Lewis’ Orange Capital issued a statement in support of a deal with Gaming and Leisure Properties, but said the the current price undervalues the assets. Orange Capital owns 2.94 million shares of Pinnacle Entertainment, which represent almost 5.0% of the company’s common stock. The largest shareholder of Pinnacle Entertainment, Inc (NYSE:PNK) among the funds that we track is Parag Vora’s HG Vora Capital Management, which owns 5.50 million shares of the company.

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