Here’s What Hedge Funds Think About PlayAGS, Inc. (AGS)

Nina Todic

Sun, May 5, 2019, 11:45 AM

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.

PlayAGS, Inc. (NYSE:AGS) shareholders have witnessed a decrease in support from the world's most elite money managers recently. Our calculations also showed that ags isn't among the 30 most popular stocks among hedge funds.

To most traders, hedge funds are perceived as unimportant, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open today, Our experts look at the masters of this club, around 750 funds. These investment experts orchestrate bulk of the hedge fund industry's total capital, and by tailing their top picks, Insider Monkey has brought to light a few investment strategies that have historically beaten the broader indices. Insider Monkey's flagship hedge fund strategy outstripped the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

We're going to take a peek at the new hedge fund action surrounding PlayAGS, Inc. (NYSE:AGS).

How have hedgies been trading PlayAGS, Inc. (NYSE:AGS)?

At Q4's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards AGS over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in PlayAGS, Inc. (NYSE:AGS) was held by Park West Asset Management, which reported holding $35.8 million worth of stock at the end of December. It was followed by Driehaus Capital with a $12.9 million position. Other investors bullish on the company included Millennium Management, Stormborn Capital Management, and Shellback Capital.

Since PlayAGS, Inc. (NYSE:AGS) has faced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few money managers that slashed their full holdings in the third quarter. Intriguingly, Jim Simons's Renaissance Technologies cut the biggest stake of the "upper crust" of funds monitored by Insider Monkey, totaling close to $4.2 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund dropped about $1.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 4 funds in the third quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as PlayAGS, Inc. (NYSE:AGS) but similarly valued. These stocks are Adecoagro SA (NYSE:AGRO), Solar Capital Ltd. (NASDAQ:SLRC), Globalstar, Inc. (NYSE:GSAT), and MBIA Inc. (NYSE:MBI). This group of stocks' market caps match AGS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGRO,17,186196,1 SLRC,12,46473,1 GSAT,12,141376,-10 MBI,18,277243,-1 Average,14.75,162822,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $72 million in AGS's case. MBIA Inc. (NYSE:MBI) is the most popular stock in this table. On the other hand Solar Capital Ltd. (NASDAQ:SLRC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks PlayAGS, Inc. (NYSE:AGS) is even less popular than SLRC. Hedge funds dodged a bullet by taking a bearish stance towards AGS. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately AGS wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); AGS investors were disappointed as the stock returned 11.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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