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Is Inspired Entertainment, Inc. (INSE) A Good Stock To Buy?

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. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Inspired Entertainment, Inc. (NASDAQ:INSE).

Inspired Entertainment, Inc. (NASDAQ:INSE) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare INSE to other stocks including Potbelly Corp (NASDAQ:PBPB), Arbutus Biopharma Corp (NASDAQ:ABUS), and Citizens Community Bancorp Inc. (NASDAQ:CZWI) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are viewed as slow, old financial vehicles of years past. While there are over 8000 funds trading at present, Our experts look at the elite of this club, approximately 850 funds. These money managers handle most of all hedge funds’ total asset base, and by shadowing their highest performing equity investments, Insider Monkey has unsheathed a few investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Parag Vora - HG Vora Capital

Parag Vora of HG Vora Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the key hedge fund action regarding Inspired Entertainment, Inc. (NASDAQ:INSE).

How have hedgies been trading Inspired Entertainment, Inc. (NASDAQ:INSE)?

Heading into the second quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in INSE over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is INSE A Good Stock To Buy?

More specifically, HG Vora Capital Management was the largest shareholder of Inspired Entertainment, Inc. (NASDAQ:INSE), with a stake worth $12.7 million reported as of the end of September. Trailing HG Vora Capital Management was 683 Capital Partners, which amassed a stake valued at $2.8 million. Harvey Partners, Renaissance Technologies, and Cove Street Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to Inspired Entertainment, Inc. (NASDAQ:INSE), around 1.24% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, designating 0.42 percent of its 13F equity portfolio to INSE.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s check out hedge fund activity in other stocks similar to Inspired Entertainment, Inc. (NASDAQ:INSE). These stocks are Potbelly Corp (NASDAQ:PBPB), Arbutus Biopharma Corp (NASDAQ:ABUS), Citizens Community Bancorp Inc. (NASDAQ:CZWI), and Century Casinos, Inc. (NASDAQ:CNTY). This group of stocks’ market valuations resemble INSE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBPB 7 10578 -4
ABUS 7 5169 -2
CZWI 6 10048 -1
CNTY 8 13239 -4
Average 7 9759 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $17 million in INSE’s case. Century Casinos, Inc. (NASDAQ:CNTY) is the most popular stock in this table. On the other hand Citizens Community Bancorp Inc. (NASDAQ:CZWI) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Inspired Entertainment, Inc. (NASDAQ:INSE) is even less popular than CZWI. Hedge funds dodged a bullet by taking a bearish stance towards INSE. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately INSE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); INSE investors were disappointed as the stock returned 0.3% during the second quarter (through June 10th) 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 so far in 2020.

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