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Smart Money Confidence in Golden Entertainment Inc (GDEN) Preceded Breakout

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Golden Entertainment Inc (NASDAQ:GDEN) investors should be aware of an increase in hedge fund interest of late. While GDEN shares were essentially flat during the third quarter, the stock could be found in one more hedge fund’s portfolio by the end of the quarter, among those that we track. There were 7 hedge funds in our database with GDEN holdings on September 30, owning 17.40% of the company’s stock at that time, also up by over 10% over the quarter. After an extremely stable eight-month run, shares finally started breaking out to the high side in November, gaining 12%.

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 Upland Software Inc (NASDAQ:UPLD), Community Healthcare Trust Inc (NYSE:CHCT), and JG Wentworth Co (NYSE:JGW) to gather more data points.

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In today’s marketplace there are dozens of formulas investors can use to analyze publicly traded companies. Some of the most underrated formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outclass the market by a healthy amount (see the details here).

Now, let’s take a glance at the recent action encompassing Golden Entertainment Inc (NASDAQ:GDEN).

How have hedgies been trading Golden Entertainment Inc (NASDAQ:GDEN)?

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 17% gain from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially (or had already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jeffrey Bronchick’s Cove Street Capital has the biggest position in Golden Entertainment Inc (NASDAQ:GDEN), worth close to $6.9 million, comprising 0.9% of its total 13F portfolio. On Cove Street Capital’s heels is Nantahala Capital Management, led by Wilmot B. Harkey and Daniel Mack, holding a $6.2 million position; 0.8% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions contain PAR Capital Management, founded by Paul Reeder, Renaissance Technologies, and Mario Gabelli’s GAMCO Investors.

Consequently, specific money managers have jumped into Golden Entertainment Inc (NASDAQ:GDEN) headfirst. Cove Street Capital, managed by Jeffrey Bronchick, initiated the biggest position in Golden Entertainment Inc (NASDAQ:GDEN). Cove Street Capital had $6.9 million invested in the company at the end of the quarter. Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management also initiated a $6.2 million position during the quarter. The other funds with new positions in the stock are PAR Capital Management, Renaissance Technologies, and GAMCO Investors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Golden Entertainment Inc (NASDAQ:GDEN) but similarly valued. These stocks are Upland Software Inc (NASDAQ:UPLD), Community Healthcare Trust Inc (NYSE:CHCT), JG Wentworth Co (NYSE:JGW), and API Technologies Corp (NASDAQ:ATNY). All of these stocks’ market caps match GDEN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UPLD 4 2966 1
CHCT 4 14821 0
JGW 4 22279 -4
ATNY 5 25565 0

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $21 million in GDEN’s case. API Technologies Corp (NASDAQ:ATNY) is the most popular stock in this table. On the other hand Upland Software Inc (NASDAQ:UPLD) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Golden Entertainment Inc (NASDAQ:GDEN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and appear to have timed its surge well, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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