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Were Hedge Funds Right About Dumping The Stars Group Inc. (TSG)?

It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards The Stars Group Inc. (NASDAQ:TSG) changed during the first quarter.

Is The Stars Group Inc. (NASDAQ:TSG) a buy right now? Hedge funds are selling. The number of bullish hedge fund bets shrunk by 6 in recent months. Our calculations also showed that TSG isn’t among the 30 most popular stocks among hedge funds (see the video below). TSG was in 38 hedge funds’ portfolios at the end of June. There were 44 hedge funds in our database with TSG positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are many methods market participants have at their disposal to evaluate publicly traded companies. A duo of the best methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can trounce the market by a very impressive amount (see the details here).

Crispin Odey

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the key hedge fund action surrounding The Stars Group Inc. (NASDAQ:TSG).

What does smart money think about The Stars Group Inc. (NASDAQ:TSG)?

At the end of the second quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TSG over the last 16 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

TSG_oct2019

Of the funds tracked by Insider Monkey, ValueAct Capital, managed by Jeffrey Ubben, holds the biggest position in The Stars Group Inc. (NASDAQ:TSG). ValueAct Capital has a $232.7 million position in the stock, comprising 2.4% of its 13F portfolio. Coming in second is Tiger Legatus Capital, managed by Jesse Ro, which holds a $101.6 million position; the fund has 45.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish comprise Crispin Odey’s Odey Asset Management Group, Amit Nitin Doshi’s Harbor Spring Capital and Parag Vora’s HG Vora Capital Management.

Judging by the fact that The Stars Group Inc. (NASDAQ:TSG) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies that elected to cut their full holdings heading into Q3. Intriguingly, Larry Robbins’s Glenview Capital dumped the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $29.5 million in stock, and Renaissance Technologies was right behind this move, as the fund dumped about $19.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to The Stars Group Inc. (NASDAQ:TSG). We will take a look at Kinross Gold Corporation (NYSE:KGC), VEON Ltd. (NASDAQ:VEON), Hawaiian Electric Industries, Inc. (NYSE:HE), and Blackstone Mortgage Trust Inc (NYSE:BXMT). This group of stocks’ market values match TSG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KGC 18 311730 -1
VEON 12 72439 -3
HE 17 146762 5
BXMT 20 143928 5
Average 16.75 168715 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $877 million in TSG’s case. Blackstone Mortgage Trust Inc (NYSE:BXMT) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks The Stars Group Inc. (NASDAQ:TSG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately TSG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TSG were disappointed as the stock returned -12.2% during the third quarter 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 many of these stocks already outperformed the market in Q3.

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

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