Below we present the list of 5 Small-Cap Growth Stocks Hedge Funds Love. For our methodology and a more comprehensive list please see 10 Small-Cap Growth Stocks Hedge Funds Love.
5. Penn National Gaming, Inc. (NASDAQ:PENN)
Number of Hedge Fund Shareholders: 37
Kicking off the second part of this list is Penn National Gaming, Inc. (NASDAQ:PENN), in which hedge fund ownership more than doubled between Q1 and Q3 of 2020. Ownership of the stock has since dipped by 20% as more investors grow concerned about the losses in its digital business. Jim Simons’ Renaissance Technologies owns 1.79 million PENN shares as of March 31.
Penn National Gaming, Inc. (NASDAQ:PENN) has a large footprint across the North American gambling landscape, owning 44 casinos, in addition to running online sports betting operations in 13 states and online casino operations in five. Industry-wide gaming revenue growth slowed considerably in June, as revenue reported by casinos, racetracks, and their partners grew by 2.2% year-over-year to $401.5 million during the month. Through June, the year-to-date growth rate stands at a much more impressive 15.2%. PENN shares trade at the most reasonable levels they have in some time, including at just 1.55x book value and 1.05x sales, their lowest levels since 2019.
The Baron Focused Growth Fund had this to say about Penn National Gaming, Inc. (NASDAQ:PENN)’s poor Q1 performance on the stock market in its Q1 2022 investor letter:
“Penn declined 18.2% in the quarter and penalized performance by 54 basis points. This was due to investor concerns over continuing losses from its Barstool business. We believe the $50 million of losses this year from its digital business is modest in relation to Penn’s $1 billion of brick and mortar EBITDA. The losses from its digital business represent customer acquisition costs incurred as additional states legalize online gambling. Since it is far less expensive to retain existing customers than to acquire new ones, we expect marketing costs to decline as Penn builds its customer base. Penn’s core bricks and mortar casino business remains strong, and the company has a healthy regional casino business and a strong balance sheet to fund digital losses.”