Should You Avoid Cracker Barrel Old Country Store, Inc. (CBRL)?

In the eyes of many of your fellow readers, hedge funds are viewed as delayed, outdated investment tools of a period lost to current times. Although there are more than 8,000 hedge funds trading currently, Insider Monkey looks at the elite of this group, about 525 funds. It is assumed that this group has its hands on the majority of all hedge funds’ total assets, and by paying attention to their highest quality investments, we’ve figured out a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to 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 (explore the details and some picks here).

Equally as necessary, bullish insider trading sentiment is a second way to look at the world of equities. Just as you’d expect, there are lots of motivations for a corporate insider to downsize shares of his or her company, but only one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this strategy if investors understand what to do (learn more here).

Now that that’s out of the way, it’s important to analyze the latest info about Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL).

How are hedge funds trading Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)?

At Q2’s end, a total of 17 of the hedge funds we track held long positions in this stock, a change of -6% from the first quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably.

When using filings from the hedgies we track, Jim Simons’s Renaissance Technologies had the biggest position in Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), worth close to $21.9 million, comprising 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which held a $6.9 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedgies that hold long positions include Israel Englander’s Millennium Management, and Joel Greenblatt’s Gotham Asset Management.

Judging by the fact that Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has experienced dropping sentiment from the top-tier hedge fund industry, it’s safe to say that there was a specific group of hedge funds that elected to cut their entire stakes last quarter. Intriguingly, Robert Jaffe’s Force Capital cut the biggest stake of all the hedgies we watch, worth about $5.1 million in stock, and Ken Grossman and Glen Schneider of SG Capital Management was right behind this move, as the fund dumped about $3.6 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.

What have insiders been doing with Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)?

Legal insider trading, particularly when it’s bullish, is most useful when the company in question has experienced transactions within the past six months. Over the last six-month time frame, Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). These stocks are Jack in the Box Inc. (NASDAQ:JACK), Buffalo Wild Wings (NASDAQ:BWLD), The Wendy’s Company (NASDAQ:WEN), Bloomin’ Brands Inc (NASDAQ:BLMN), and The Cheesecake Factory Incorporated (NASDAQ:CAKE). This group of stocks belong to the restaurants industry and their market caps are closest to CBRL’s market cap.