Is FAT Brands Inc. (FAT) A Good Stock To Buy?

In this article we are going to use hedge fund sentiment as a tool and determine whether FAT Brands Inc. (NASDAQ:FAT) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is FAT a good stock to buy? FAT Brands Inc. (NASDAQ:FAT) investors should be aware of an increase in support from the world’s most elite money managers of late. FAT Brands Inc. (NASDAQ:FAT) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 3 hedge funds in our database with FAT positions at the end of the fourth quarter. Our calculations also showed that FAT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In today’s marketplace there are numerous tools stock traders use to appraise their holdings. A pair of the less known tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace their index-focused peers by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Sander Gerber of Hudson Bay Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding FAT Brands Inc. (NASDAQ:FAT).

Do Hedge Funds Think FAT Is A Good Stock To Buy Now?

At first quarter’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in FAT a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, ADW Capital, managed by Adam Wyden, holds the number one position in FAT Brands Inc. (NASDAQ:FAT). ADW Capital has a $5.6 million position in the stock, comprising 1.8% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $0.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish comprise Sander Gerber’s Hudson Bay Capital Management, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position ADW Capital allocated the biggest weight to FAT Brands Inc. (NASDAQ:FAT), around 1.78% of its 13F portfolio. Hudson Bay Capital Management is also relatively very bullish on the stock, dishing out 0.0017 percent of its 13F equity portfolio to FAT.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in FAT Brands Inc. (NASDAQ:FAT). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks similar to FAT Brands Inc. (NASDAQ:FAT). These stocks are Entera Bio Ltd. (NASDAQ:ENTX), Baudax Bio, Inc. (NASDAQ:BXRX), ARC Document Solutions Inc (NYSE:ARC), Universal Stainless & Alloy Products, Inc. (NASDAQ:USAP), Research Frontiers, Inc. (NASDAQ:REFR), Trinity Biotech plc (NASDAQ:TRIB), and Pingtan Marine Enterprise Ltd. (NASDAQ:PME). This group of stocks’ market caps are closest to FAT’s market cap.

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As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $6 million in FAT’s case. ARC Document Solutions Inc (NYSE:ARC) is the most popular stock in this table. On the other hand Entera Bio Ltd. (NASDAQ:ENTX) is the least popular one with only 2 bullish hedge fund positions. FAT Brands Inc. (NASDAQ:FAT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FAT is 61. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on FAT as the stock returned 70% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.