Is PENN Stock A Buy or Sell?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Penn National Gaming, Inc (NASDAQ:PENN).

Is PENN stock a buy or sell? Penn National Gaming, Inc (NASDAQ:PENN) shareholders have witnessed a decrease in hedge fund sentiment of late. Penn National Gaming, Inc (NASDAQ:PENN) was in 41 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 45. There were 45 hedge funds in our database with PENN holdings at the end of September. Our calculations also showed that PENN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Stan Druckenmiller DUQUESNE CAPITAL

Stanley Druckenmiller of Duquesne Capital

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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. Now we’re going to take a look at the fresh hedge fund action surrounding Penn National Gaming, Inc (NASDAQ:PENN).

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

At the end of December, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in PENN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Whale Rock Capital Management held the most valuable stake in Penn National Gaming, Inc (NASDAQ:PENN), which was worth $474 million at the end of the fourth quarter. On the second spot was Duquesne Capital which amassed $131.1 million worth of shares. Tybourne Capital Management, Holocene Advisors, and LMR Partners 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 Isomer Partners allocated the biggest weight to Penn National Gaming, Inc (NASDAQ:PENN), around 9.18% of its 13F portfolio. ThornTree Capital Partners is also relatively very bullish on the stock, designating 6.25 percent of its 13F equity portfolio to PENN.

Judging by the fact that Penn National Gaming, Inc (NASDAQ:PENN) has faced bearish sentiment from the smart money, it’s safe to say that there is a sect of hedge funds who were dropping their positions entirely by the end of the fourth quarter. Interestingly, Daniel S. Och’s OZ Management cut the largest stake of all the hedgies watched by Insider Monkey, valued at about $48.3 million in stock, and Frank Fu’s CaaS Capital was right behind this move, as the fund said goodbye to about $42.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Penn National Gaming, Inc (NASDAQ:PENN) but similarly valued. These stocks are Omnicom Group Inc. (NYSE:OMC), Ally Financial Inc (NYSE:ALLY), C3.ai, Inc. (NYSE:AI), WPP Plc (NYSE:WPP), The J.M. Smucker Company (NYSE:SJM), James Hardie Industries plc (NYSE:JHX), and DaVita Inc (NYSE:DVA). All of these stocks’ market caps match PENN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OMC 34 546941 0
ALLY 57 2593837 4
AI 37 483532 37
WPP 6 37552 -1
SJM 34 580428 3
JHX 4 11803 0
DVA 32 4814258 -2
Average 29.1 1295479 5.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $1295 million. That figure was $1325 million in PENN’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 4 bullish hedge fund positions. Penn National Gaming, Inc (NASDAQ:PENN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PENN is 63.2. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on PENN as the stock returned 35.9% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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