“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) and see how it was affected.
Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) investors should be aware of an increase in hedge fund sentiment recently. Our calculations also showed that RRGB isn’t among the 30 most popular stocks among hedge funds.
In the eyes of most shareholders, hedge funds are viewed as underperforming, outdated investment vehicles of yesteryear. While there are over 8,000 funds in operation at the moment, Our experts choose to focus on the upper echelon of this group, approximately 700 funds. These money managers shepherd the majority of all hedge funds’ total capital, and by following their first-class investments, Insider Monkey has identified various investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by 6 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Let’s view the key hedge fund action regarding Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB).
What does the smart money think about Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)?
Heading into the fourth quarter of 2018, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RRGB over the last 13 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), with a stake worth $20.2 million reported as of the end of September. Trailing Citadel Investment Group was Arrowstreet Capital, which amassed a stake valued at $12.7 million. Millennium Management, Renaissance Technologies, and GMT Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, some big names have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, created the biggest position in Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). Renaissance Technologies had $4.5 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $3.2 million position during the quarter. The other funds with brand new RRGB positions are Dmitry Balyasny’s Balyasny Asset Management, Matthew Hulsizer’s PEAK6 Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) but similarly valued. These stocks are Star Gas Partners, L.P. (NYSE:SGU), Unifi, Inc. (NYSE:UFI), Prothena Corporation plc (NASDAQ:PRTA), and The Cato Corporation (NYSE:CATO). This group of stocks’ market valuations are closest to RRGB’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGU | 9 | 115811 | 0 |
| UFI | 14 | 96386 | 1 |
| PRTA | 14 | 245866 | 2 |
| CATO | 19 | 43807 | 3 |
| Average | 14 | 125468 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $64 million in RRGB’s case. The Cato Corporation (NYSE:CATO) is the most popular stock in this table. On the other hand Star Gas Partners, L.P. (NYSE:SGU) is the least popular one with only 9 bullish hedge fund positions. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CATO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
