While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Take-Two Interactive Software, Inc. (NASDAQ:TTWO).
Is TTWO a good stock to buy now? Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has experienced a decrease in support from the world’s most elite money managers lately. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) was in 52 hedge funds’ portfolios at the end of September. The all time high for this statistics is 66. Our calculations also showed that TTWO 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 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 leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium 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 let’s take a glance at the key hedge fund action encompassing Take-Two Interactive Software, Inc. (NASDAQ:TTWO).
Hedge fund activity in Take-Two Interactive Software, Inc. (NASDAQ:TTWO)
Heading into the fourth quarter of 2020, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from the second quarter of 2020. By comparison, 60 hedge funds held shares or bullish call options in TTWO a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Take-Two Interactive Software, Inc. (NASDAQ:TTWO), with a stake worth $259 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $139.8 million. Citadel Investment Group, Polar Capital, and Suvretta Capital Management 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 Tensile Capital allocated the biggest weight to Take-Two Interactive Software, Inc. (NASDAQ:TTWO), around 7.85% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, designating 6.52 percent of its 13F equity portfolio to TTWO.
Since Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their full holdings in the third quarter. Intriguingly, Dan Loeb’s Third Point dropped the largest investment of the 750 funds monitored by Insider Monkey, valued at about $69.8 million in stock. David Fear’s fund, Thunderbird Partners, also dumped its stock, about $66 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 9 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Take-Two Interactive Software, Inc. (NASDAQ:TTWO). We will take a look at Coupa Software Incorporated (NASDAQ:COUP), First Republic Bank (NYSE:FRC), Zscaler, Inc. (NASDAQ:ZS), Suncor Energy Inc. (NYSE:SU), PG&E Corporation (NYSE:PCG), Ameriprise Financial, Inc. (NYSE:AMP), and Keysight Technologies Inc (NYSE:KEYS). All of these stocks’ market caps match TTWO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1876 million. That figure was $1289 million in TTWO’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Suncor Energy Inc. (NYSE:SU) is the least popular one with only 22 bullish hedge fund positions. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TTWO is 47.4. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on TTWO, though not to the same extent, as the stock returned 9.7% since Q3 (through December 2nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.