Did Hedge Funds Drop The Ball On International Game Technology PLC (IGT) ?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one 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 International Game Technology PLC (NYSE:IGT).

Is International Game Technology PLC (NYSE:IGT) an attractive investment right now? The smart money is getting less bullish. The number of long hedge fund positions retreated by 2 recently. Our calculations also showed that IGT isn’t among the 30 most popular stocks among hedge funds (view the video below). IGT was in 30 hedge funds’ portfolios at the end of June. There were 32 hedge funds in our database with IGT positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Reeder PAR Capital Management

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the recent hedge fund action regarding International Game Technology PLC (NYSE:IGT).

Hedge fund activity in International Game Technology PLC (NYSE:IGT)

At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the first quarter of 2019. By comparison, 35 hedge funds held shares or bullish call options in IGT a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

No of Hedge Funds with IGT Positions

More specifically, Samlyn Capital was the largest shareholder of International Game Technology PLC (NYSE:IGT), with a stake worth $60.2 million reported as of the end of March. Trailing Samlyn Capital was HG Vora Capital Management, which amassed a stake valued at $48 million. BloombergSen, PAR Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Because International Game Technology PLC (NYSE:IGT) has faced a decline in interest from the smart money, it’s safe to say that there was a specific group of funds that decided to sell off their positions entirely heading into Q3. At the top of the heap, Gregg Moskowitz’s Interval Partners dumped the biggest stake of all the hedgies tracked by Insider Monkey, worth about $26 million in stock, and David Rosen’s Rubric Capital Management was right behind this move, as the fund said goodbye to about $24.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds heading into Q3.

Let’s now review hedge fund activity in other stocks similar to International Game Technology PLC (NYSE:IGT). We will take a look at Genesis Energy, L.P. (NYSE:GEL), ABM Industries Incorporated (NYSE:ABM), Sunoco LP (NYSE:SUN), and Columbia Banking System Inc (NASDAQ:COLB). This group of stocks’ market valuations are similar to IGT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GEL 4 29878 1
ABM 10 38801 2
SUN 6 15222 -1
COLB 7 112689 -1
Average 6.75 49148 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $280 million in IGT’s case. ABM Industries Incorporated (NYSE:ABM) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks International Game Technology PLC (NYSE:IGT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on IGT as the stock returned 11.3% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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