5 Small-Cap Growth Stocks Hedge Funds Love

3. Boyd Gaming Corporation (NYSE:BYD)

Number of Hedge Fund Shareholders: 40

Boyd Gaming Corporation (NYSE:BYD) is another small-cap gambling-related stock that hedge funds love. Ownership of BYD has skyrocketed by 74% since the first quarter of 2021, with Lee Ainslie’s Maverick Capital and Robert Hockett’s Covalent Capital Partners being among the company’s new shareholders.

Boyd Gaming Corporation (NYSE:BYD)’s Q2 revenue was flat year-over-year at $894 million, which beat estimates, being up against challenging comps from a year ago, when government stimulus checks provided a sales boost. Boyd’s margins improved to 39.6% during the quarter, the fifth straight quarter of 39% margins for the gaming company. The company’s strong Q2 trends appear to have persisted into July according to Barclays analyst Brandt Montour, who has an ‘Overweight’ rating and $65 price target on the stock.

The Baron Real Estate Fund likes Boyd Gaming Corporation (NYSE:BYD)’s attractive valuation and potential as a takeover target, having this to say about the company in its Q1 2022 investor letter:

“Following strong share price performance in 2021, the shares of Boyd Gaming Corporation continued to perform well in the first quarter of 2022. Boyd is one of the largest and most successful casino entertainment companies in the U.S. The company owns and operates 28 casino gaming properties in 10 states with a large presence in Las Vegas and a geographic focus on the drive-to, leisure gaming customer. We remain optimistic about the prospects for Boyd’s shares because business conditions are strong, management maintains a liquid and conservatively capitalized balance sheet, insiders own approximately 27% of the company, the shares remain attractively valued at only 7.5 times 2022 estimated cash flow and a double-digit free cash flow yield, and we believe the company could be an attractive acquisition candidate should its current valuation remain discounted relative to recent private market casino and gaming transactions.”