Hedge Funds Are Piling Into The Cheesecake Factory Incorporated (CAKE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 873 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 30th holdings, data that is available nowhere else. Should you consider The Cheesecake Factory Incorporated (NASDAQ:CAKE) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

The Cheesecake Factory Incorporated (NASDAQ:CAKE) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistic is 27. CAKE investors should pay attention to an increase in hedge fund interest recently. There were 18 hedge funds in our database with CAKE positions at the end of the first quarter. Our calculations also showed that CAKE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Now we’re going to view the fresh hedge fund action regarding The Cheesecake Factory Incorporated (NASDAQ:CAKE).

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

At Q2’s end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CAKE over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

The largest stake in The Cheesecake Factory Incorporated (NASDAQ:CAKE) was held by Candlestick Capital Management, which reported holding $55.8 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $49.3 million position. Other investors bullish on the company included Fisher Asset Management, Shellback Capital, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to The Cheesecake Factory Incorporated (NASDAQ:CAKE), around 2.23% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, earmarking 1.34 percent of its 13F equity portfolio to CAKE.

Now, specific money managers were breaking ground themselves. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, created the biggest position in The Cheesecake Factory Incorporated (NASDAQ:CAKE). Shellback Capital had $24.7 million invested in the company at the end of the quarter. Brian Scudieri’s Kehrs Ridge Capital also made a $5.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Steve Cohen’s Point72 Asset Management, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Cheesecake Factory Incorporated (NASDAQ:CAKE) but similarly valued. These stocks are LendingTree, Inc (NASDAQ:TREE), AMC Networks Inc (NASDAQ:AMCX), BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), Group 1 Automotive, Inc. (NYSE:GPI), Main Street Capital Corporation (NYSE:MAIN), and Embraer SA (NYSE:ERJ). All of these stocks’ market caps are similar to CAKE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $298 million. That figure was $248 million in CAKE’s case. LendingTree, Inc (NASDAQ:TREE) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 8 bullish hedge fund positions. The Cheesecake Factory Incorporated (NASDAQ:CAKE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CAKE is 79.8. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately CAKE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CAKE were disappointed as the stock returned -20.6% since the end of June (through 10/15) 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.

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