Hedge Funds Are Selling Red Robin Gourmet Burgers, Inc. (RRGB)

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) changed recently.

Is Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) a bargain? Money managers are taking a bearish view. The number of bullish hedge fund bets retreated by 4 in recent months. RRGB was in 21 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with RRGB positions at the end of the previous quarter. 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 Trex Company, Inc. (NYSE:TREX), Amkor Technology, Inc. (NASDAQ:AMKR), and Opus Bank (NASDAQ:OPB) to gather more data points.

In today’s marketplace there are a multitude of metrics stock market investors can use to appraise publicly traded companies. Some of the best metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the top investment managers can outpace their index-focused peers by a solid margin (see the details here).

Now, let’s view the recent action surrounding Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB).

How have hedgies been trading Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)?

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Millennium Management, managed by Israel Englander, holds the most valuable position in Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). Millennium Management has an $28.5 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Cadian Capital, led by Eric Bannasch, holding an $16 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include Dmitry Balyasny’s Balyasny Asset Management, Legg Mason Capital Management and Joseph A. Jolson’s Harvest Capital Strategies.

Because Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds that elected to cut their positions entirely by the end of the third quarter. Interestingly, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital dumped the biggest investment of all the hedgies watched by Insider Monkey, comprising about $8.2 million in stock. D. E. Shaw’s fund, D E Shaw, also said goodbye to its stock, about $4.1 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). These stocks are Trex Company, Inc. (NYSE:TREX), Amkor Technology, Inc. (NASDAQ:AMKR), Opus Bank (NASDAQ:OPB), and Envestnet Inc (NYSE:ENV). This group of stocks’ market values are similar to RRGB’s market value.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $111 million in RRGB’s case. Trex Company, Inc. (NYSE:TREX) and Amkor Technology, Inc. (NASDAQ:AMKR) are the most popular stocks in this table with a total of 16 funds holding stakes in each. On the other hand, Opus Bank (NASDAQ:OPB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.