Do Hedge Funds Love PlayAGS, Inc. (AGS)?

Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like PlayAGS, Inc. (NYSE:AGS).

Is PlayAGS, Inc. (NYSE:AGS) a buy, sell, or hold? Hedge funds are getting more optimistic. The number of long hedge fund bets inched up by 9 in recent months. Our calculations also showed that ags isn’t among the 30 most popular stocks among hedge funds. AGS was in 15 hedge funds’ portfolios at the end of the third quarter of 2018. There were 6 hedge funds in our database with AGS positions at the end of the previous quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus

Let’s view the new hedge fund action encompassing PlayAGS, Inc. (NYSE:AGS).

How have hedgies been trading PlayAGS, Inc. (NYSE:AGS)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 150% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in AGS over the last 13 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

No of Hedge Funds with AGS Positions

The largest stake in PlayAGS, Inc. (NYSE:AGS) was held by Park West Asset Management, which reported holding $38.5 million worth of stock at the end of September. It was followed by Driehaus Capital with a $15.4 million position. Other investors bullish on the company included Stormborn Capital Management, Renaissance Technologies, and Shellback Capital.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, assembled the largest position in PlayAGS, Inc. (NYSE:AGS). Renaissance Technologies had $4.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $3.3 million position during the quarter. The following funds were also among the new AGS investors: John Overdeck and David Siegel’s Two Sigma Advisors, Benjamin A. Smith’s Laurion Capital Management, and Anand Parekh’s Alyeska Investment Group.

Let’s go over hedge fund activity in other stocks similar to PlayAGS, Inc. (NYSE:AGS). These stocks are Unisys Corporation (NYSE:UIS), Universal Logistics Holdings, Inc. (NASDAQ:ULH), Wabash National Corporation (NYSE:WNC), and HighPoint Resources Corporation (NYSE:HPR). This group of stocks’ market valuations are similar to AGS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UIS 14 180425 0
ULH 12 47152 6
WNC 13 117841 1
HPR 13 104566 -6
Average 13 112496 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $84 million in AGS’s case. Unisys Corporation (NYSE:UIS) is the most popular stock in this table. On the other hand Universal Logistics Holdings, Inc. (NASDAQ:ULH) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks PlayAGS, Inc. (NYSE:AGS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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