Hedge Funds Are Piling Into Texas Roadhouse Inc (TXRH)

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Texas Roadhouse Inc (NASDAQ:TXRH).

Is Texas Roadhouse Inc (NASDAQ:TXRH) a safe stock to buy now? Money managers were betting on the stock. The number of bullish hedge fund positions advanced by 15 lately. Texas Roadhouse Inc (NASDAQ:TXRH) was in 37 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TXRH isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the eyes of most market participants, hedge funds are assumed to be slow, old financial tools of the past. While there are more than 8000 funds trading at present, We hone in on the crème de la crème of this club, about 850 funds. Most estimates calculate that this group of people control bulk of the hedge fund industry’s total capital, and by keeping an eye on their best picks, Insider Monkey has uncovered a number of investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. 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 homepage. With all of this in mind we’re going to analyze the latest hedge fund action surrounding Texas Roadhouse Inc (NASDAQ:TXRH).

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

At Q2’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 68% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in TXRH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Melvin Capital Management held the most valuable stake in Texas Roadhouse Inc (NASDAQ:TXRH), which was worth $322.3 million at the end of the second quarter. On the second spot was Melvin Capital Management which amassed $57.7 million worth of shares. Point72 Asset Management, AQR Capital Management, and GLG Partners 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 Kehrs Ridge Capital allocated the biggest weight to Texas Roadhouse Inc (NASDAQ:TXRH), around 4.51% of its 13F portfolio. Stormborn Capital Management is also relatively very bullish on the stock, setting aside 1.95 percent of its 13F equity portfolio to TXRH.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Interval Partners, managed by Gregg Moskowitz, initiated the most outsized position in Texas Roadhouse Inc (NASDAQ:TXRH). Interval Partners had $32.6 million invested in the company at the end of the quarter. Leon Shaulov’s Maplelane Capital also made a $28.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Renaissance Technologies, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks similar to Texas Roadhouse Inc (NASDAQ:TXRH). These stocks are AerCap Holdings N.V. (NYSE:AER), Janus Henderson Group plc (NYSE:JHG), Acuity Brands, Inc. (NYSE:AYI), Prosperity Bancshares, Inc. (NYSE:PB), ShockWave Medical, Inc. (NASDAQ:SWAV), Tetra Tech, Inc. (NASDAQ:TTEK), and Choice Hotels International, Inc. (NYSE:CHH). This group of stocks’ market caps match TXRH’s market cap.

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As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $578 million. That figure was $807 million in TXRH’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Choice Hotels International, Inc. (NYSE:CHH) is the least popular one with only 15 bullish hedge fund positions. Texas Roadhouse Inc (NASDAQ:TXRH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TXRH is 76.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately TXRH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TXRH were disappointed as the stock returned -4.1% since the end of June (through 10/11) 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 many of these stocks already outperformed the market since 2019.

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