Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Del Taco Restaurants Inc (NASDAQ:TACO).
Hedge fund interest in Del Taco Restaurants Inc (NASDAQ:TACO) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Coastal Financial Corporation (NASDAQ:CCB), Workhorse Group, Inc. (NASDAQ:WKHS), and Westport Fuel Systems Inc. (NASDAQ:WPRT) to gather more data points. Our calculations also showed that TACO 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the fresh hedge fund action regarding Del Taco Restaurants Inc (NASDAQ:TACO).
How are hedge funds trading Del Taco Restaurants Inc (NASDAQ:TACO)?
At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in TACO over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Del Taco Restaurants Inc (NASDAQ:TACO), with a stake worth $2.2 million reported as of the end of September. Trailing Renaissance Technologies was Two Sigma Advisors, which amassed a stake valued at $0.9 million. Arrowstreet Capital, Millennium Management, and Winton Capital Management 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 Algert Coldiron Investors allocated the biggest weight to Del Taco Restaurants Inc (NASDAQ:TACO), around 0.03% of its 13F portfolio. Ionic Capital Management is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to TACO.
Because Del Taco Restaurants Inc (NASDAQ:TACO) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies that decided to sell off their entire stakes last quarter. Interestingly, Minhua Zhang’s Weld Capital Management said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $0.8 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Del Taco Restaurants Inc (NASDAQ:TACO). These stocks are Coastal Financial Corporation (NASDAQ:CCB), Workhorse Group, Inc. (NASDAQ:WKHS), Westport Fuel Systems Inc. (NASDAQ:WPRT), and Alta Equipment Group Inc. (NYSE:ALTG). All of these stocks’ market caps match TACO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCB | 2 | 11773 | -2 |
| WKHS | 6 | 5522 | -4 |
| WPRT | 13 | 12752 | 0 |
| ALTG | 20 | 23486 | 10 |
| Average | 10.25 | 13383 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $6 million in TACO’s case. Alta Equipment Group Inc. (NYSE:ALTG) is the most popular stock in this table. On the other hand Coastal Financial Corporation (NASDAQ:CCB) is the least popular one with only 2 bullish hedge fund positions. Del Taco Restaurants Inc (NASDAQ:TACO) is not the least popular stock in this group but hedge fund interest is still below average. 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 gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on TACO as the stock returned 79.3% during the second quarter and outperformed the market by an even larger margin.
Follow Del Taco Restaurants Inc.
Follow Del Taco Restaurants Inc.
Disclosure: None. This article was originally published at Insider Monkey.
