Point72 Used Big Data to Short Weight Watchers, Dave & Buster's

(Bloomberg) -- Big data gave Point72 Asset Management a fresh view into Dave & Buster’s Entertainment Inc. -- and a reason to short the chain.

Combing through geo-location data linked to anonymous credit card information, the hedge fund discovered that when customers went to entertainment venue Topgolf for the first time, their spending at a nearby Dave & Buster’s went down immediately, Matthew Granade, who oversees Point72’s big data efforts, said at the CNBC Delivering Alpha conference Thursday.

The consumer shift added to Point72’s conviction to bet against Dave & Buster’s in August, a position it has since exited, according to a person familiar with the matter. The Dallas-based company’s shares fell about 5% in the first half of August and have rebounded since then.

The Dave & Buster’s trade provides a glimpse into how hedge funds can capitalize on alternative data with short-term wagers. Steve Cohen’s Point72, which manages $14 billion, has been among the firms that have been spending heavily on data sets and quants to improve their human trading, often with mixed results.

In January when people start dieting, Point72 took a deep dive into social sentiment, online search and credit card transaction data to build an overall picture of Weight Watchers International Inc., Granade said. Traders saw a decline in search and social media interest at Weight Watchers while offerings like the Keto Diet by competitors were gaining momentum.

The insights led the fund to short the company in January, Granade said. The shares plunged in the first two months of the year but have recovered some ground since then. Point72 has exited the short wager, the person said.

A spokeswoman for Weight Watchers declined to comment, while Dave & Buster’s did not respond to a request for comment.

Hedge funds grind through an unending stream of data sets to find the few that give them winning bets. Point72 talks to about 1,200 vendors a year but will purchase data from only 30 or 40 of them, Granade, the chief market intelligence officer, said on the sidelines of the conference.

“There is a tremendous amount of data that has to get sorted through, and that’s huge part of challenge,” he said.

Training fund managers has been another hurdle to clear. Point72 has hired “data evangelists” to help them understand how to use it. The firm also trains analysts in its academy in modeling, programming and accounting to ensure they have both investing and data skills.

“The vast majority of people on our platform, our discretionary investors, are using this data," Granade said. “This was not true four or five years ago.”

Point72 has returned about 12.5% this year through August, according to another person familiar with the matter.

--With assistance from Joshua Fineman.

To contact the reporter on this story: Hema Parmar in New York at hparmar6@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Vincent Bielski, Josh Friedman

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