The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements are one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Arcos Dorados Holding Inc (NYSE:ARCO) and find out how it is affected by hedge funds’ moves.
Is Arcos Dorados Holding Inc the right pick for your portfolio? Hedge funds are in a bullish mood. The number of bullish hedge fund bets improved by 3 in recent months. At the end of this article we will also compare ARCO to other stocks, including Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), and Glu Mobile Inc. (NASDAQ:GLUU) to get a better sense of its popularity.
In today’s marketplace there are tons of methods investors put to use to value publicly traded companies. Two of the most innovative methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite investment managers can outpace the market by a healthy amount (see the details here).
Keeping this in mind, we’re going to go over the fresh action encompassing Arcos Dorados Holding Inc (NYSE:ARCO).
What does the smart money think about Arcos Dorados Holding Inc (NYSE:ARCO)?
Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a surge of 75% from the second quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the largest position in Arcos Dorados Holding Inc (NYSE:ARCO), with an estimated worth of $8.3 million, comprising less than 0.1%% of its 13F portfolio. On Bill & Melinda Gates Foundation Trust’s heels is Third Avenue Management, led by Martin Whitman, holding a $4.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Steven Boyd’s Armistice Capital, Peter Muller’s PDT Partners and George Hall’s Clinton Group.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Armistice Capital, managed by Steven Boyd, assembled the largest new position in Arcos Dorados Holding Inc (NYSE:ARCO). The fund reported a $3.8 million investment in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $0.2 million position during the quarter. The following funds were also among the new ARCO investors: David Costen Haley’s HBK Investments and Ken Griffin’s Citadel Investment Group.
Let’s go over hedge fund activity in other stocks similar to Arcos Dorados Holding Inc (NYSE:ARCO). We will take a look at Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS), Glu Mobile Inc. (NASDAQ:GLUU), and Motorcar Parts of America, Inc. (NASDAQ:MPAA). All of these stocks’ market caps are similar to ARCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RUTH | 17 | 30330 | 5 |
| JBSS | 10 | 43856 | 0 |
| GLUU | 21 | 106279 | -3 |
| MPAA | 16 | 108608 | -1 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $17 million in ARCO’s case. Glu Mobile Inc. (NASDAQ:GLUU) is the most popular stock in this table. On the other hand John B. Sanfilippo & Son, Inc. (NASDAQ:JBSS) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Arcos Dorados Holding Inc (NYSE:ARCO) is clearly lagging behind in terms of both the number of long positions and the size of the hedge funds investments. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
