Accel Entertainment, Inc. (ACEL) Fell Out Of Favor With Hedge Funds

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Accel Entertainment, Inc. (NYSE:ACEL).

Accel Entertainment, Inc. (NYSE:ACEL) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Accel Entertainment, Inc. (NYSE:ACEL) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 19. There were 12 hedge funds in our database with ACEL holdings at the end of March. Our calculations also showed that ACEL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s analyze the recent hedge fund action surrounding Accel Entertainment, Inc. (NYSE:ACEL).

Do Hedge Funds Think ACEL Is A Good Stock To Buy Now?

At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the first quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in ACEL a year ago. So, let’s review 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, Bruce Emery’s Greenvale Capital has the largest position in Accel Entertainment, Inc. (NYSE:ACEL), worth close to $62.9 million, comprising 6.9% of its total 13F portfolio. The second most bullish fund manager is Light Street Capital, led by Glen Kacher, holding a $49.4 million position; 2.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions contain Eli Cohen’s Crescent Park Management, Leonard A. Potter’s Wildcat Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Greenvale Capital allocated the biggest weight to Accel Entertainment, Inc. (NYSE:ACEL), around 6.94% of its 13F portfolio. Crescent Park Management is also relatively very bullish on the stock, setting aside 5.93 percent of its 13F equity portfolio to ACEL.

Since Accel Entertainment, Inc. (NYSE:ACEL) has experienced bearish sentiment from the smart money, it’s easy to see that there is a sect of hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest position of the 750 funds watched by Insider Monkey, totaling about $3.3 million in stock. Peter S. Park’s fund, Park West Asset Management, also sold off its stock, about $2.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Accel Entertainment, Inc. (NYSE:ACEL) but similarly valued. These stocks are Central Securities Corporation (NYSE:CET), Ingles Markets, Incorporated (NASDAQ:IMKTA), Design Therapeutics, Inc. (NASDAQ:DSGN), Simulations Plus, Inc. (NASDAQ:SLP), Donnelley Financial Solutions, Inc. (NYSE:DFIN), Cowen Inc. (NASDAQ:COWN), and MagnaChip Semiconductor Corporation (NYSE:MX). All of these stocks’ market caps resemble ACEL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $182 million in ACEL’s case. MagnaChip Semiconductor Corporation (NYSE:MX) is the most popular stock in this table. On the other hand Central Securities Corporation (NYSE:CET) is the least popular one with only 3 bullish hedge fund positions. Accel Entertainment, Inc. (NYSE:ACEL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ACEL is 29.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately ACEL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ACEL investors were disappointed as the stock returned 1.3% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.