Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Accel Entertainment, Inc. (NYSE:TPGH) investors should be aware of an increase in hedge fund interest in recent months. TPGH was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with TPGH holdings at the end of the previous quarter. Our calculations also showed that TPGH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the key hedge fund action surrounding Accel Entertainment, Inc. (NYSE:TPGH).
How are hedge funds trading Accel Entertainment, Inc. (NYSE:TPGH)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TPGH over the last 17 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Accel Entertainment, Inc. (NYSE:TPGH) was held by Glazer Capital, which reported holding $34.1 million worth of stock at the end of September. It was followed by Hudson Bay Capital Management with a $30.3 million position. Other investors bullish on the company included Simcoe Capital Management, Governors Lane, and BlueCrest Capital Mgmt.. In terms of the portfolio weights assigned to each position 1060 Capital Management allocated the biggest weight to Accel Entertainment, Inc. (NYSE:TPGH), around 5.94% of its 13F portfolio. Simcoe Capital Management is also relatively very bullish on the stock, setting aside 5.52 percent of its 13F equity portfolio to TPGH.
Consequently, specific money managers were leading the bulls’ herd. Simcoe Capital Management, managed by Jeffrey Jacobowitz, assembled the most valuable position in Accel Entertainment, Inc. (NYSE:TPGH). Simcoe Capital Management had $21.5 million invested in the company at the end of the quarter. Jeffrey Jacobowitz’s Simcoe Capital Management also made a $2.5 million investment in the stock during the quarter. The other funds with brand new TPGH positions are Brian Gustavson and Andrew Haley’s 1060 Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks similar to Accel Entertainment, Inc. (NYSE:TPGH). We will take a look at Modine Manufacturing Company (NYSE:MOD), Independence Holding Company (NYSE:IHC), CURO Group Holdings Corp. (NYSE:CURO), and Revance Therapeutics Inc (NASDAQ:RVNC). This group of stocks’ market valuations resemble TPGH’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $184 million in TPGH’s case. Modine Manufacturing Company (NYSE:MOD) is the most popular stock in this table. On the other hand Independence Holding Company (NYSE:IHC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Accel Entertainment, Inc. (NYSE:TPGH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately TPGH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TPGH were disappointed as the stock returned 2.6% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.