Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ recent losses in Facebook. Let’s take a closer look at what the funds we track think about Carrols Restaurant Group, Inc. (NASDAQ:TAST) in this article.
Carrols Restaurant Group, Inc. (NASDAQ:TAST) was in 20 hedge funds’ portfolios at the end of September. TAST investors should pay attention to a decrease in hedge fund interest lately. There were 21 hedge funds in our database with TAST holdings at the end of the previous quarter. Our calculations also showed that TAST isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to go over the new hedge fund action encompassing Carrols Restaurant Group, Inc. (NASDAQ:TAST).
How have hedgies been trading Carrols Restaurant Group, Inc. (NASDAQ:TAST)?
Heading into the fourth quarter of 2018, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in TAST heading into this year. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
More specifically, Private Capital Management was the largest shareholder of Carrols Restaurant Group, Inc. (NASDAQ:TAST), with a stake worth $28.2 million reported as of the end of September. Trailing Private Capital Management was Cannell Capital, which amassed a stake valued at $18.7 million. Renaissance Technologies, Cove Street Capital, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Carrols Restaurant Group, Inc. (NASDAQ:TAST) has experienced bearish sentiment from the smart money, it’s safe to say that there is a sect of fund managers that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital dropped the largest stake of the 700 funds tracked by Insider Monkey, comprising an estimated $7.6 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dumped about $0.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Carrols Restaurant Group, Inc. (NASDAQ:TAST) but similarly valued. These stocks are Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), EMC Insurance Group Inc. (NASDAQ:EMCI), Gores Holdings II, Inc. (NASDAQ:GSHT), and Independence Holding Company (NYSE:IHC). This group of stocks’ market values match TAST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RIGL | 17 | 99159 | 0 |
| EMCI | 2 | 8294 | 1 |
| GSHT | 17 | 177691 | 1 |
| IHC | 4 | 15381 | 0 |
| Average | 10 | 75131 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $135 million in TAST’s case. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) is the most popular stock in this table. On the other hand EMC Insurance Group Inc. (NASDAQ:EMCI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Carrols Restaurant Group, Inc. (NASDAQ:TAST) 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.
Disclosure: None. This article was originally published at Insider Monkey.
