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Is Gaming and Leisure Properties Inc (GLPI) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Gaming and Leisure Properties Inc (NASDAQ:GLPI) and determine whether the smart money was really smart about this stock.

Gaming and Leisure Properties Inc (NASDAQ:GLPI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. Our calculations also showed that GLPI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Ally Financial Inc (NYSE:ALLY), and Credit Acceptance Corp. (NASDAQ:CACC) to gather more data points. Our calculations also showed that GLPI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Gates of Gates Capital

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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now let’s take a peek at the new hedge fund action surrounding Gaming and Leisure Properties Inc (NASDAQ:GLPI).

How have hedgies been trading Gaming and Leisure Properties Inc (NASDAQ:GLPI)?

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GLPI over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Gaming and Leisure Properties Inc (NASDAQ:GLPI) was held by Renaissance Technologies, which reported holding $150.6 million worth of stock at the end of September. It was followed by Gates Capital Management with a $103.7 million position. Other investors bullish on the company included Cardinal Capital, Two Sigma Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Gates Capital Management allocated the biggest weight to Gaming and Leisure Properties Inc (NASDAQ:GLPI), around 5.19% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, designating 5.1 percent of its 13F equity portfolio to GLPI.

Judging by the fact that Gaming and Leisure Properties Inc (NASDAQ:GLPI) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their full holdings heading into Q3. At the top of the heap, Ricky Sandler’s Eminence Capital said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling close to $29.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $26.3 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Gaming and Leisure Properties Inc (NASDAQ:GLPI). We will take a look at Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Ally Financial Inc (NYSE:ALLY), Credit Acceptance Corp. (NASDAQ:CACC), Livongo Health, Inc. (NASDAQ:LVGO), Formula One Group (NASDAQ:FWONK), WestRock Company (NYSE:WRK), and BorgWarner Inc. (NYSE:BWA). This group of stocks’ market values match GLPI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MLCO 32 610443 4
ALLY 54 1635686 9
CACC 23 985846 1
LVGO 36 338665 19
FWONK 49 1402496 12
WRK 32 461872 6
BWA 35 802792 5
Average 37.3 891114 8

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $891 million. That figure was $499 million in GLPI’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Credit Acceptance Corp. (NASDAQ:CACC) is the least popular one with only 23 bullish hedge fund positions. Gaming and Leisure Properties Inc (NASDAQ:GLPI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GLPI is 42.2. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and surpassed the market by 23.2 percentage points. Unfortunately GLPI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GLPI investors were disappointed as the stock returned 6.7% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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