Where Do Hedge Funds Stand On Dave & Buster’s Entertainment, Inc. (PLAY)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY).

Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) shareholders have witnessed an increase in enthusiasm from smart money lately. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 28. There were 12 hedge funds in our database with PLAY holdings at the end of June. Our calculations also showed that PLAY 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Minhua Zhang of Weld Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let’s go over the recent hedge fund action regarding Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY).

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

At third quarter’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in PLAY 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.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Scott Ross’s Hill Path Capital has the most valuable position in Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), worth close to $67.4 million, comprising 11.1% of its total 13F portfolio. Coming in second is Eminence Capital, managed by Ricky Sandler, which holds a $63.4 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Steve Cohen’s Point72 Asset Management, Mubadala Investment’s MIC Capital Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Hill Path Capital allocated the biggest weight to Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), around 11.12% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, earmarking 3.7 percent of its 13F equity portfolio to PLAY.

Consequently, key hedge funds have been driving this bullishness. Candlestick Capital Management, managed by Jack Woodruff, created the biggest position in Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY). Candlestick Capital Management had $11.6 million invested in the company at the end of the quarter. David MacKnight’s One Fin Capital Management also initiated a $5.7 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Minhua Zhang’s Weld Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks similar to Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY). We will take a look at XPEL Inc. (NASDAQ:XPEL), Protagonist Therapeutics, Inc. (NASDAQ:PTGX), Cohu, Inc. (NASDAQ:COHU), German American Bancorp., Inc. (NASDAQ:GABC), Collegium Pharmaceutical Inc (NASDAQ:COLL), Ranpak Holdings Corp (NYSE:PACK), and Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS). This group of stocks’ market caps match PLAY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XPEL 12 16036 8
PTGX 13 276569 2
COHU 8 47643 -4
GABC 4 12514 0
COLL 17 227881 -3
PACK 14 317636 0
VLRS 9 75839 0
Average 11 139160 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $202 million in PLAY’s case. Collegium Pharmaceutical Inc (NASDAQ:COLL) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 4 bullish hedge fund positions. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PLAY is 72.3. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on PLAY as the stock returned 58.8% since the end of Q3 (through 12/14) 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.