Hedge Funds Aren’t Crazy About Dave & Buster’s Entertainment, Inc. (PLAY) Anymore

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY).

Is Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) undervalued? The best stock pickers were turning less bullish. The number of bullish hedge fund bets decreased by 2 recently. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) was in 26 hedge funds’ portfolios at the end of September. The all time high for this statistic is 28. Our calculations also showed that PLAY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY).

Christian Leone of Luxor Capital Group

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

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in PLAY a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) was held by Hill Path Capital, which reported holding $175.3 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $49.7 million position. Other investors bullish on the company included Candlestick Capital Management, Point72 Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Hill Path Capital allocated the biggest weight to Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), around 9.09% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, designating 5.92 percent of its 13F equity portfolio to PLAY.

Seeing as Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) has witnessed bearish sentiment from the smart money, logic holds that there lies a certain “tier” of funds that elected to cut their entire stakes in the third quarter. At the top of the heap, Alexander Mitchell’s Scopus Asset Management dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling about $40.6 million in call options, and Alexander Mitchell’s Scopus Asset Management was right behind this move, as the fund cut about $16.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) but similarly valued. We will take a look at Proto Labs Inc (NYSE:PRLB), Service Properties Trust (NASDAQ:SVC), Alector, Inc. (NASDAQ:ALEC), USANA Health Sciences, Inc. (NYSE:USNA), Trillium Therapeutics Inc. (NASDAQ:TRIL), Cornerstone Building Brands, Inc. (NYSE:CNR), and Tellurian Inc. (NYSE:TELL). All of these stocks’ market caps resemble PLAY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PRLB 17 259887 -2
SVC 17 87028 4
ALEC 20 236209 2
USNA 16 203568 -5
TRIL 40 498397 16
CNR 22 104816 2
TELL 15 93120 -2
Average 21 211861 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $469 million in PLAY’s case. Trillium Therapeutics Inc. (NASDAQ:TRIL) is the most popular stock in this table. On the other hand Tellurian Inc. (NYSE:TELL) is the least popular one with only 15 bullish hedge fund positions. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PLAY is 52.9. 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 positive signal but 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately PLAY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PLAY were disappointed as the stock returned -10.7% since the end of September (through 12/9) 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 many of these stocks already outperformed the market since 2019.

Follow Dave & Buster's Entertainment Inc. (NASDAQ:PLAY)

Suggested Articles:

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