Is Texas Roadhouse Inc (TXRH) Going to Burn These Hedge Funds?

If you were to ask many market players, hedge funds are assumed to be bloated, old investment tools of an era lost to time. Although there are over 8,000 hedge funds trading in present day, Insider Monkey aim at the upper echelon of this group, around 525 funds. It is widely held that this group oversees the majority of the hedge fund industry’s total assets, and by tracking their highest performing stock picks, we’ve unsheathed a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (find the details here).

Equally as necessary, positive insider trading sentiment is another way to analyze the investments you’re interested in. Just as you’d expect, there are plenty of motivations for an executive to drop shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the valuable potential of this strategy if investors know where to look (learn more here).

Thus, we’re going to study the latest info surrounding Texas Roadhouse Inc (NASDAQ:TXRH).

What have hedge funds been doing with Texas Roadhouse Inc (NASDAQ:TXRH)?

At the end of the second quarter, a total of 12 of the hedge funds we track held long positions in this stock, a change of -8% from the first quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully.

According to our 13F database, SAC Subsidiary’s Sigma Capital Management had the biggest position in Texas Roadhouse Inc (NASDAQ:TXRH), worth close to $23.8 million, comprising 1.1% of its total 13F portfolio. On Sigma Capital Management’s heels is Jim Simons of Renaissance Technologies, with a $19.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds that hold long positions include Steven Cohen’s SAC Capital Advisors, Mark Broach’s Manatuck Hill Partners and Andy Redleaf’s Whitebox Advisors.

Judging by the fact that Texas Roadhouse Inc (NASDAQ:TXRH) has faced declining interest from upper-tier hedge fund managers, we can see that there were a few money managers who were dropping their entire stakes last quarter. Intriguingly, Clint Carlson’s Carlson Capital dropped the biggest investment of all the hedgies we watch, worth about $5.6 million in stock. Jeffrey Vinik’s fund, Vinik Asset Management, also sold off its stock, about $2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.

How have insiders been trading Texas Roadhouse Inc (NASDAQ:TXRH)?

Insider buying made by high-level executives is most useful when the company in focus has experienced transactions within the past half-year. Over the latest 180-day time frame, Texas Roadhouse Inc (NASDAQ:TXRH) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Texas Roadhouse Inc (NASDAQ:TXRH). These stocks are Bob Evans Farms Inc (NASDAQ:BOBE), Buffalo Wild Wings (NASDAQ:BWLD), Jack in the Box Inc. (NASDAQ:JACK), DineEquity Inc (NYSE:DIN), and Papa John’s Int’l, Inc. (NASDAQ:PZZA). All of these stocks are in the restaurants industry and their market caps resemble TXRH’s market cap.

Using the returns explained by the previously mentioned research, average investors must always pay attention to hedge fund and insider trading activity, and Texas Roadhouse Inc (NASDAQ:TXRH) shareholders fit into this picture quite nicely.

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