Were Hedge Funds Right About Piling Into International Game Technology PLC (IGT)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded International Game Technology PLC (NYSE:IGT) and determine whether the smart money was really smart about this stock.

International Game Technology PLC (NYSE:IGT) was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. IGT investors should pay attention to a decrease in support from the world’s most elite money managers lately. There were 30 hedge funds in our database with IGT holdings at the end of the previous quarter. Our calculations also showed that IGT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

Ken Griffin

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s check out the key hedge fund action encompassing International Game Technology PLC (NYSE:IGT).

What does smart money think about International Game Technology PLC (NYSE:IGT)?

At Q1’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2019. By comparison, 32 hedge funds held shares or bullish call options in IGT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is IGT A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of International Game Technology PLC (NYSE:IGT), with a stake worth $13 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $7.7 million. Millennium Management, AQR Capital Management, and Alden Global Capital 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 SCW Capital Management allocated the biggest weight to International Game Technology PLC (NYSE:IGT), around 2.95% of its 13F portfolio. Proxima Capital Management is also relatively very bullish on the stock, setting aside 2.81 percent of its 13F equity portfolio to IGT.

Judging by the fact that International Game Technology PLC (NYSE:IGT) has witnessed falling interest from the smart money, it’s easy to see that there exists a select few money managers that slashed their full holdings last quarter. Intriguingly, Robert Pohly’s Samlyn Capital said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $70.6 million in stock, and Paul Reeder and Edward Shapiro’s PAR Capital Management was right behind this move, as the fund cut about $20.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 5 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as International Game Technology PLC (NYSE:IGT) but similarly valued. These stocks are Helios Technologies, Inc. (NASDAQ:HLIO), State Auto Financial Corporation (NASDAQ:STFC), Nu Skin Enterprises, Inc. (NYSE:NUS), and SPX FLOW, Inc. (NASDAQ:FLOW). This group of stocks’ market valuations match IGT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HLIO 4 53242 -2
STFC 6 8352 1
NUS 18 111349 -4
FLOW 15 117620 -1
Average 10.75 72641 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $56 million in IGT’s case. Nu Skin Enterprises, Inc. (NYSE:NUS) is the most popular stock in this table. On the other hand Helios Technologies, Inc. (NASDAQ:HLIO) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks International Game Technology PLC (NYSE:IGT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on IGT as the stock returned 49.6% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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