Is PENN A Good Stock To Buy Now?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Penn National Gaming, Inc (NASDAQ:PENN) in this article.

Is PENN a good stock to buy now? Penn National Gaming, Inc (NASDAQ:PENN) has seen an increase in support from the world’s most elite money managers recently. Penn National Gaming, Inc (NASDAQ:PENN) was in 45 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that PENN 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).

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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Keeping this in mind we’re going to take a glance at the recent hedge fund action regarding Penn National Gaming, Inc (NASDAQ:PENN).

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

Heading into the fourth quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PENN over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Penn National Gaming, Inc (NASDAQ:PENN) was held by Whale Rock Capital Management, which reported holding $421.7 million worth of stock at the end of September. It was followed by Duquesne Capital with a $137.6 million position. Other investors bullish on the company included Citadel Investment Group, LMR Partners, and ThornTree Capital Partners. In terms of the portfolio weights assigned to each position Isomer Partners allocated the biggest weight to Penn National Gaming, Inc (NASDAQ:PENN), around 10.51% of its 13F portfolio. ThornTree Capital Partners is also relatively very bullish on the stock, setting aside 7.63 percent of its 13F equity portfolio to PENN.

As aggregate interest increased, some big names have jumped into Penn National Gaming, Inc (NASDAQ:PENN) headfirst. Whale Rock Capital Management, managed by Alex Sacerdote, established the most outsized position in Penn National Gaming, Inc (NASDAQ:PENN). Whale Rock Capital Management had $421.7 million invested in the company at the end of the quarter. Eashwar Krishnan’s Tybourne Capital Management also initiated a $53.5 million position during the quarter. The other funds with new positions in the stock are Seth Wunder’s Black-and-White Capital, Joseph Samuels’s Islet Management, and Brandon Haley’s Holocene Advisors.

Let’s also examine hedge fund activity in other stocks similar to Penn National Gaming, Inc (NASDAQ:PENN). These stocks are Franklin Resources, Inc. (NYSE:BEN), ICON Public Limited Company (NASDAQ:ICLR), Entegris Inc (NASDAQ:ENTG), Annaly Capital Management, Inc. (NYSE:NLY), Raymond James Financial, Inc. (NYSE:RJF), Teva Pharmaceutical Industries Limited (NYSE:TEVA), and Essential Utilities Inc (NYSE:WTRG). This group of stocks’ market caps are similar to PENN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BEN 33 414803 -3
ICLR 24 621133 0
ENTG 25 1061024 -3
NLY 27 337862 6
RJF 28 449873 -7
TEVA 33 916185 2
WTRG 21 545124 6
Average 27.3 620858 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $621 million. That figure was $1183 million in PENN’s case. Franklin Resources, Inc. (NYSE:BEN) is the most popular stock in this table. On the other hand Essential Utilities Inc (NYSE:WTRG) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Penn National Gaming, Inc (NASDAQ:PENN) is more popular among hedge funds. Our overall hedge fund sentiment score for PENN is 90. 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. Unfortunately PENN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PENN were disappointed as the stock returned 8.3% since the end of the third quarter (through 12/8) 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 most of these stocks already outperformed the market in 2020.

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