In this piece, we will take a look at 10 of the best small-cap casino stocks hedge funds are buying.
Casinos, whether land-based, on riverboats, or at racetracks, are extremely popular gambling establishments in the United States. In recent years, the number of commercial and tribal casinos in the U.S. has remained relatively stable, with a total of 466 commercial and 515 tribal casinos operating nationwide in 2021. The United States now hosts many of the world’s major casino companies and is renowned for being home to one of the most famous gambling destinations globally—Las Vegas, Nevada. Annually, the iconic Las Vegas Strip attracts millions of visitors eager to test their luck at poker tables and slot machines, or simply enjoy the wide range of services offered by the casinos, including hotels, restaurants, live shows, and entertainment options. Due to the significant influx of American and international tourists (before COVID-19), Nevada consistently maintains its position as the U.S. state with the highest gross gaming casino revenue in the country.
During the third quarter, a significant majority of gaming executives expressed satisfaction with their current business circumstances, categorizing them as either “good” or “satisfactory.” However, there was a notable decline in the percentage of those optimistic about the outlook, dropping from 62% in the first quarter to 42% according to the latest report from the American Gaming Association (AGA). These positive trends come as no surprise considering the impressive growth witnessed in the gaming sector over recent years. According to a report by The Business Research Company, the global gambling market achieved an approximate value of $449.04 billion in 2022 and is anticipated to expand to about $765.49 billion by 2027, showcasing a Compound Annual Growth Rate (CAGR) of 11.3%. This surge is primarily propelled by the escalating legalization of gambling activities, consequently leading to a growth in the gambling population. The proliferation of legalized online sports betting sites also continues to expand rapidly across the country. In a recent development, Kentucky became the 35th state to legalize sportsbooks, making it the 25th state to offer legal sports betting. Simultaneously, the pent-up demand resulting from the pandemic spurred a surge of travelers to casino destinations. In the month of August, Nevada marked its 30th consecutive month with gambling wins exceeding $1 billion, underscoring the industry’s vitality.
Casino stocks have gained traction with investors this year due to anticipated growth and favorable projections from analysts. Prominent casino stocks like MGM Resorts International (NYSE:MGM), Caesars Entertainment (NASDAQ:CZR), and Wynn Resorts, Limited (NASDAQ:WYNN) have already yielded favorable returns for shareholders. In this piece, we will delve deeper into some small-cap casino stocks that have gained favor among hedge funds.
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Our Methodology
For our list of the best small-cap casino stocks hedge funds are buying, we scanned Insider Monkey’s database of Q2 2023 and selected companies that are involved in the casino and gambling industry. These companies own and operate casinos, resorts, and other gaming and entertainment facilities. Following this, we picked some small-cap stocks and ranked them in ascending order of the number of hedge funds having stakes in them as of Q2 2023.
10. Studio City International Holdings Limited (NYSE:MSC)
Market Capitalization as of October 4: $893.44 million
Number of Hedge Fund Holders: 5
Studio City International Holdings Limited (NYSE:MSC) functions as a holding company overseeing a range of subsidiary ventures. These subsidiaries provide an array of services including dining, entertainment, lodging, meeting and event spaces, as well as casino facilities.
According to the unaudited financial results for Q2 2023, the company reported total operating revenues of $115.2 million. This represents a significant increase compared to the negative total operating revenues of $1.9 million recorded in the second quarter of 2022. The positive change can be primarily attributed to the easing of COVID-19 related restrictions in Macau in January 2023, the commencement of operations at the Epic Tower and indoor waterpark in April 2023, and the introduction of residency concerts in the same month. These factors collectively resulted in a rise in revenue from casino contracts and elevated non-gaming revenues.
As of the end of the second quarter of 2023, 5 hedge funds in Insider Monkey’s database of funds had stakes in Studio City International Holdings Limited (NYSE:MSC). The most significant stakeholder of the firm during this period was Edward A. Mule’s Silver Point Capital which owns a $195 million stake in Studio City International Holdings Limited (NYSE:MSC).
Much like MGM Resorts International (NYSE:MGM), Caesars Entertainment (NASDAQ:CZR), and Wynn Resorts, Limited (NASDAQ:WYNN), Studio City International Holdings Limited (NYSE:MSC) is a stock investors should keep on their radar.
9. Super Group (SGHC) Limited (NYSE:SGHC)
Market Capitalization as of October 4: $1.73 billion
Number of Hedge Fund Holders: 5
Super Group (SGCH) Limited (NYSE:SGHC) is the parent company of prominent worldwide online sports betting and gaming enterprises, encompassing Betway, a top-tier online sports betting brand, and Spin, an online casino platform hosting multiple brands.
On September 1, Super Group (SGHC) Limited (NYSE:SGHC) revealed that Betway had solidified its position as the Official Global Betting Partner for the men’s team of English Premier League club, Arsenal. This multi-year partnership marks a valuable addition to the brand’s football affiliations, complementing existing agreements within the English Premier League, where Betway holds the role of Principal Partner with West Ham and Official Global Partner with Brighton. Additionally, Betway has established significant partnerships with clubs in La Liga and the Bundesliga. Expanding beyond football, Betway has curated an impressive sponsorship portfolio across various sports, encompassing the NBA, NHL, Tennis, Cricket, and Horse Racing.
Insider Monkey’s database recorded 5 hedge funds holding stakes within the company at the close of the second quarter of 2023. The total value of these stakes amounted to approximately $528,300.
8. Bluegreen Vacations Holding Corporation (NYSE:BVH)
Market Capitalization as of October 4: $701.76 million
Number of Hedge Fund Holders: 11
Bluegreen Vacations Holding Corporation (NYSE:BVH) specializes in vacation ownership and resort management. While the company is not directly involved in the casino sector, it owns and manages a collection of vacation resorts located in various sought-after destinations across the US. Presently, the company offers a quarterly dividend of $0.20 per share, resulting in a dividend yield of 2.23% as of September 27. It ranks among the top performers in the casino stock category, having delivered a noteworthy 41.8% return to shareholders since the beginning of 2023.
In Q2 2023, Bluegreen Vacations Holding Corporation (NYSE:BVH) reported revenue of $260.6 million, reflecting a growth of 10.6% compared to the same period in the prior year. The company concluded the quarter with a substantial sum of over $178.7 million available in cash and cash equivalents.
As of the end of Q2 2023, 11 hedge funds within Insider Monkey’s database maintained stakes in Bluegreen Vacations Holding Corporation (NYSE:BVH), a figure consistent with the previous quarter. The combined value of these stakes exceeded $27.2 million.
7. Bally’s Corporation (NYSE:BALY)
Market Capitalization as of October 4: $496.45 million
Number of Hedge Fund Holders: 15
Bally’s Corporation (NYSE:BALY), headquartered in Providence, Rhode Island, is a company engaged in gaming, betting, and interactive entertainment. With an expanding omni-channel footprint in both Online Sports Betting (OSB) and iGaming, the company presently oversees 15 casinos spanning 10 states. Additionally, it owns a golf course in New York and a horse racetrack in Colorado. Furthermore, the company holds OSB licenses in 18 states.
Earlier this July, a notable collaboration was unveiled between live casino supplier Stakelogic and Bally’s Corporation (NYSE:BALY). This partnership follows the enactment of the Rhode Island iGaming bill on June 22, 2023, which broadened Bally’s Corporation’s (NYSE:BALY) role as an active casino operator in the state to encompass iGaming services. Under their agreement, Bally’s will leverage Stakelogic’s software and studio technology, along with their operational expertise, to introduce Bally’s live casino experience in North America. Commencing in April 2024, Bally’s Corporation (NYSE:BALY) is set to launch a range of online live casino games, including Blackjack, Roulette, and Baccarat, in Rhode Island.
Of the 910 hedge funds in Insider Monkey’s database as of Q2 2023, 15 funds held a stake in Bally’s Corporation (NYSE:BALY). These stakes were collectively valued at $62.38 million.
6. Golden Entertainment, Inc. (NASDAQ:GDEN)
Market Capitalization as of October 4: $957.4 million
Number of Hedge Fund Holders: 16
Golden Entertainment, Inc. (NASDAQ:GDEN) headquartered in Enterprise, Nevada, is a prominent American gaming company overseeing casinos, taverns, and slot routes. Established in 2015 through the merger of Golden Gaming and Lakes Entertainment, it currently holds the distinction of being the largest operator of taverns and slot routes in Nevada.
Earlier this August, Golden Entertainment, Inc. (NASDAQ:GDEN) successfully finalized the sale of Rocky Gap Casino Resort in Maryland, fetching a total of $260.0 million. This move followed Golden Entertainment, Inc. (NASDAQ:GDEN)’s decision to sell its distributed gaming operations in Nevada and Montana to J&J Ventures Gaming. The sale encompasses assets valued at an aggregate cash consideration of $322.5 million, with an additional $39.0 million estimated as purchased cash at closing. The transaction is anticipated to conclude by year-end. Golden Entertainment, Inc. (NASDAQ:GDEN)’s founder, chairman, and CEO, Blake Sartini, emphasized that this recent sale would further fortify the company’s financial position and enhance its liquidity. A significant portion of the proceeds, approximately $175.0 million, is earmarked for repaying outstanding loan debt.
As of the end of the second quarter of 2023, 16 hedge funds had stakes in Golden Entertainment, Inc. (NASDAQ:GDEN), with a total stake value of approximately $125.3 million.
Bernzott Capital Advisors made the following comment about Golden Entertainment, Inc. (NASDAQ:GDEN) in its second quarter 2023 investor letter:
“Golden Entertainment, Inc. (NASDAQ:GDEN): The company is a pure play Nevada focused casino operator following the divestiture of non-core casino assets located outside of the region. The Nevada event calendar remains robust driven by the Stanley Cup Final, Formula 1 racing and Super Bowl as well as a recovery in the mid-week convention market. Substantial investments in their STRAT property should drive incremental revenue at higher margins for the next several years.”
Similar to MGM Resorts International (NYSE:MGM), Caesars Entertainment (NASDAQ:CZR), and Wynn Resorts, Limited (NASDAQ:WYNN), Golden Entertainment, Inc. (NASDAQ:GDEN) is a stock hedge funds are paying attention to.
5. Accel Entertainment, Inc. (NYSE:ACEL)
Market Capitalization as of October 4: $921.23 million
Number of Hedge Fund Holders: 17
Accel Entertainment, Inc. (NYSE:ACEL) operates as a distributed gaming operator, specializing in the installation, maintenance, and operation of gaming terminals and redemption devices that dispense winnings, including those with automated teller machine (ATM) features. Furthermore, Accel Entertainment, Inc. (NYSE:ACEL) oversees various other amusement devices within authorized non-casino establishments.
Accel Entertainment, Inc. (NYSE:ACEL) reported earnings of $0.24 per share, surpassing estimates by 50.00% compared to the projected $0.16 per share. This also represents an increase in earnings from the same period last year when the company reported $0.24 per share. Additionally, Accel Entertainment, Inc. (NYSE:ACEL) posted optimistic revenues of $292.6 million, reflecting a 28.43% growth from the previous year and exceeding consensus estimates by 5.44%, which were set at $277.5 million.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Darlington Partners Capital is a leading shareholder in Accel Entertainment, Inc. (NYSE:ACEL), with 8.09 million shares worth more than $85.5 million.
4. Monarch Casino & Resort, Inc. (NASDAQ:MCRI)
Market Capitalization as of October 4: $1.2 billion
Number of Hedge Fund Holders: 19
Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is an American firm within the gaming and hospitality sector, with a primary emphasis on casino operations and the development of resorts. The company manages casino properties providing diverse gaming choices for its patrons.
During the second quarter of 2023, Monarch Casino & Resort, Inc. (NASDAQ: MCRI) disclosed a revenue of $123.6 million, marking a growth of 7.3% compared to the same period in the previous year. The company had a substantial sum of over $35 million available in cash and cash equivalents. Specifically, its casino revenue surged to $68.8 million from $63.8 million in the corresponding period last year. On August 30, Monarch Casino & Resort, Inc. (NASDAQ: MCRI) declared a quarterly dividend of $0.30 per share, contributing to a dividend yield of 1.92% as of October 4.
As of the latest data, the count of hedge funds tracked by Insider Monkey that hold stakes in Monarch Casino & Resort, Inc. (NASDAQ: MCRI) remained at 19, consistent with the previous quarter. The combined value of these stakes surpasses $53.6 million. Among the hedge funds being tracked by Insider Monkey, Texas-based investment firm Lafitte Capital Management is a leading shareholder in Monarch Casino & Resort, Inc. (NASDAQ:MCRI), with 370,917 shares worth more than $21.8 million.
3. PlayAGS, Inc. (NYSE:AGS)
Market Capitalization as of October 4: $251.41 million
Number of Hedge Fund Holders: 22
PlayAGS, Inc. (NYSE:AGS) is a company that creates and provides gaming services and products to the gaming industry, including casinos, both in the United States and globally. The company’s operations are categorized into three segments: Electronic Gaming Machines (EGM), Table Products, and Interactive Games (Interactive). PlayAGS (NYSE:AGS) has seen a strong 35.17% increase in its shares year to date, showcasing a robust performance compared to other small-cap gaming stocks. Several analysts are optimistic about the potential for further upside for this slot machine manufacturer.
22 of the 910 hedge funds part of Insider Monkey’s Q2 2023 database had invested in the company. PlayAGS, Inc. (NYSE:AGS)’s largest hedge fund shareholder is Don Morgan’s Brigade Capital with a $10.65 million investment.
2. Playa Hotels & Resorts NV (NASDAQ:PLYA)
Market Capitalization as of October 4: $1.05 billion
Number of Hedge Fund Holders: 24
Playa Hotels & Resorts N.V. (NASDAQ:PLYA) also known as “Playa” stands as a prominent proprietor, operator, and developer of all-inclusive resorts situated in highly sought-after beachfront locales across Mexico, Jamaica, and the Dominican Republic. Currently, Playa oversees a comprehensive portfolio, encompassing 24 resorts with a total of 9,097 rooms. These resorts operate under brands such as Hyatt Zilara, Hyatt Ziva, Hilton All-Inclusive, Tapestry Collection by Hilton, Wyndham Alltra, Seadust, Jewel Resorts, and The Luxury Collection.
According to Insider Monkey’s second quarter 2023 hedge fund survey, out of the 910 hedge funds analyzed, 24 of them had chosen to invest in Playa Hotels & Resorts NV (NASDAQ:PLYA). Notably, among these investors, Davidson Kempner, led by Thomas Lenox Kempner, emerged as the largest shareholder, holding a significant stake valued at $123.26 million.
In its investor letter for the second quarter of 2023, Silver Beech Capital provided a comment or statement concerning Playa Hotels & Resorts N.V. (NASDAQ:PLYA):
“Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is a small-capitalization owner/operator of 25 all-inclusive resorts in Mexico (Cancun and Pacific Coast), the Dominican Republic, and Jamaica. Playa’s portfolio is branded (mostly Hilton and Hyatt), includes primarily luxury/upscale resorts, and operates at among the highest margins in the hotel industry. Playa’s resorts are irreplaceable assets in supply-constrained markets that continue to benefit from rising post-COVID international tourism.
We believe the public market discounts Playa’s shares based on recessionary fears, however, strong international flight data into Playa’s regional airport hubs do not support this view, and spot private market valuations for Playa’s hotels exceed its public market valuation. Management has demonstrated impressive capital allocation to address this valuation gap by moderating growth capital expenses for only the highest return projects and looking to sell select strategic resorts and repurchase shares at today’s attractive level. Over the last two quarters, Playa has repurchased more than 4% of the company’s outstanding shares. The company trades at a TEV/EBITDA of 7.6x (2023E), and a low double-digit free cash flow yield. We believe Playa’s intrinsic value is more than 50% greater than its June 30 share price.”
1. Everi Holdings Inc. (NYSE:EVRI)
Market Capitalization as of October 4: $1.12 billion
Number of Hedge Fund Holders: 33
Everi Holdings Inc. (NYSE:EVRI), previously known as Global Cash Access Holdings, Inc., is a Nevada-based company located in Spring Valley. The company manufactures slot machines and offers financial equipment and services to casinos. Everi Holdings Inc. operates through two primary segments: Games and Financial Technology Solutions (FinTech).
Everi Holdings Inc. (NYSE:EVRI) released its second-quarter results on August 9. Revenues showed a 6% increase, reaching $208.7 million, compared to $197.2 million in the previous year. Within the FinTech segment, revenues experienced a 13% growth, totaling $95.6 million, driven by a 26% increase in software and other revenues, a 9% rise in financial access revenues, and a 6% increase in hardware revenues. In the Games segment, revenues saw a 1% rise, reaching $113.1 million, with a 5% increase in gaming operations.
At the close of the second quarter of 2023, 33 hedge funds disclosed positions in Everi Holdings Inc. (NYSE:EVRI) worth $190.48 million. Among the hedge funds being tracked by Insider Monkey, Jeffrey Jacobowitz’s Simcoe Capital Management is the most prominent shareholder in the company, owning over 3.98 million shares.
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Disclosure: None. 10 Best Small-Cap Casino Stocks Hedge Funds Are Buying is originally published on Insider Monkey.
