Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Century Casinos, Inc. (NASDAQ:CNTY)? The smart money sentiment can provide an answer to this question.
Is CNTY a good stock to buy now? Hedge fund interest in Century Casinos, Inc. (NASDAQ:CNTY) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CNTY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Soliton, Inc. (NASDAQ:SOLY), Apyx Medical Corporation (NASDAQ:APYX), and Glory Star New Media Group Holdings Limited (NASDAQ:GSMG) to gather more data points.
Video: 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we’re going to view the recent hedge fund action surrounding Century Casinos, Inc. (NASDAQ:CNTY).
Do Hedge Funds Think CNTY Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CNTY over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Century Casinos, Inc. (NASDAQ:CNTY) was held by Royce & Associates, which reported holding $12.5 million worth of stock at the end of September. It was followed by Ariel Investments with a $4.5 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and Engineers Gate Manager. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to Century Casinos, Inc. (NASDAQ:CNTY), around 0.33% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, setting aside 0.25 percent of its 13F equity portfolio to CNTY.
Due to the fact that Century Casinos, Inc. (NASDAQ:CNTY) has faced declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies who sold off their full holdings in the third quarter. At the top of the heap, Noah Levy and Eugene Dozortsev’s Newtyn Management dumped the largest position of the 750 funds watched by Insider Monkey, totaling an estimated $0.5 million in stock. Donald Sussman’s fund, Paloma Partners, also dumped its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Century Casinos, Inc. (NASDAQ:CNTY). These stocks are Soliton, Inc. (NASDAQ:SOLY), Apyx Medical Corporation (NASDAQ:APYX), Glory Star New Media Group Holdings Limited (NASDAQ:GSMG), Gencor Industries, Inc. (NASDAQ:GENC), Five Star Senior Living Inc. (NYSE:FVE), Timkensteel Corp (NYSE:TMST), and Electrameccanica Vehicles Corp. (NASDAQ:SOLO). All of these stocks’ market caps match CNTY’s market cap.
|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 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $24 million in CNTY’s case. Timkensteel Corp (NYSE:TMST) is the most popular stock in this table. On the other hand Soliton, Inc. (NASDAQ:SOLY) is the least popular one with only 1 bullish hedge fund positions. Century Casinos, Inc. (NASDAQ:CNTY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNTY is 69. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on CNTY as the stock returned 24.1% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.