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 at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded The Chefs Warehouse, Inc (NASDAQ:CHEF) and determine whether the smart money was really smart about this stock.
Is The Chefs Warehouse, Inc (NASDAQ:CHEF) a buy right now? Hedge funds were taking an optimistic view. The number of bullish hedge fund bets moved up by 4 lately. Our calculations also showed that CHEF 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). CHEF was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. There were 7 hedge funds in our database with CHEF positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. 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. Keeping this in mind we’re going to check out the new hedge fund action surrounding The Chefs Warehouse, Inc (NASDAQ:CHEF).
How are hedge funds trading The Chefs Warehouse, Inc (NASDAQ:CHEF)?
Heading into the second quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 57% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHEF over the last 18 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in The Chefs Warehouse, Inc (NASDAQ:CHEF) was held by Legion Partners Asset Management, which reported holding $16.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $11.5 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Legion Partners Asset Management allocated the biggest weight to The Chefs Warehouse, Inc (NASDAQ:CHEF), around 7.08% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.04 percent of its 13F equity portfolio to CHEF.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Legion Partners Asset Management, managed by Ted White and Christopher Kiper, created the largest position in The Chefs Warehouse, Inc (NASDAQ:CHEF). Legion Partners Asset Management had $16.8 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $2.9 million position during the quarter. The other funds with brand new CHEF positions are John Overdeck and David Siegel’s Two Sigma Advisors, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks similar to The Chefs Warehouse, Inc (NASDAQ:CHEF). We will take a look at Purple Innovation, Inc. (NASDAQ:PRPL), Tivity Health, Inc. (NASDAQ:TVTY), Intelligent Systems Corporation (NYSE:INS), and Flexion Therapeutics Inc (NASDAQ:FLXN). This group of stocks’ market values are similar to CHEF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PRPL | 14 | 71224 | 1 |
| TVTY | 13 | 134787 | -5 |
| INS | 9 | 62514 | 0 |
| FLXN | 14 | 55390 | -1 |
| Average | 12.5 | 80979 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $35 million in CHEF’s case. Purple Innovation, Inc. (NASDAQ:PRPL) is the most popular stock in this table. On the other hand Intelligent Systems Corporation (NYSE:INS) is the least popular one with only 9 bullish hedge fund positions. The Chefs Warehouse, Inc (NASDAQ:CHEF) 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CHEF as the stock returned 34.9% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
