As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Shake Shack Inc (NYSE:SHAK).
Shake Shack Inc (NYSE:SHAK) investors should pay attention to an increase in hedge fund interest recently. Shake Shack Inc (NYSE:SHAK) was in 25 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. Our calculations also showed that SHAK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a look at the recent hedge fund action encompassing Shake Shack Inc (NYSE:SHAK).
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
Do Hedge Funds Think SHAK Is A Good Stock To Buy Now?
At third quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the second quarter of 2021. On the other hand, there were a total of 26 hedge funds with a bullish position in SHAK a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, 12 West Capital Management was the largest shareholder of Shake Shack Inc (NYSE:SHAK), with a stake worth $161.5 million reported as of the end of September. Trailing 12 West Capital Management was Valiant Capital, which amassed a stake valued at $37.1 million. Citadel Investment Group, Select Equity Group, and Lakewood 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 12 West Capital Management allocated the biggest weight to Shake Shack Inc (NYSE:SHAK), around 7.37% of its 13F portfolio. Valiant Capital is also relatively very bullish on the stock, dishing out 3.59 percent of its 13F equity portfolio to SHAK.
As industrywide interest jumped, specific money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, initiated the most outsized position in Shake Shack Inc (NYSE:SHAK). D E Shaw had $2.8 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $2.6 million position during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Matthew Hulsizer’s PEAK6 Capital Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s also examine hedge fund activity in other stocks similar to Shake Shack Inc (NYSE:SHAK). We will take a look at M.D.C. Holdings, Inc. (NYSE:MDC), Veracyte Inc (NASDAQ:VCYT), Steven Madden, Ltd. (NASDAQ:SHOO), Evertec Inc (NYSE:EVTC), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Turning Point Therapeutics, Inc. (NASDAQ:TPTX), and Associated Banc Corp (NYSE:ASB). This group of stocks’ market valuations match SHAK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDC | 18 | 32800 | -4 |
| VCYT | 21 | 455716 | -1 |
| SHOO | 23 | 195874 | 5 |
| EVTC | 17 | 189912 | -3 |
| CBRL | 21 | 107435 | -7 |
| TPTX | 21 | 449761 | -7 |
| ASB | 19 | 183680 | 1 |
| Average | 20 | 230740 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $285 million in SHAK’s case. Steven Madden, Ltd. (NASDAQ:SHOO) is the most popular stock in this table. On the other hand Evertec Inc (NYSE:EVTC) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Shake Shack Inc (NYSE:SHAK) is more popular among hedge funds. Our overall hedge fund sentiment score for SHAK is 85.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Unfortunately SHAK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SHAK were disappointed as the stock returned -2.3% since the end of the third quarter (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Shake Shack Inc. (NYSE:SHAK)
Follow Shake Shack Inc. (NYSE:SHAK)
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Disclosure: None. This article was originally published at Insider Monkey.
