Top 10 Holdings of Engaged Capital

3. Shake Shack Inc. (NYSE:SHAK)

Engaged Capital’s Equity Stakes: $80.60 Million

 Number of Hedge Fund Holders: 34

Following the acquisition of a 6.6% stake in the first half of 2023, Shake Shack Inc. (NYSE:SHAK) became one of the top 10 holdings of Engaged Capital, emerging as it is the biggest holding in the Consumer Cyclical sector. Following the acquisition, the stock ended up doubling in value.

The rally came as Engaged Capital embarked on a proxy fight that involved pushing for three board seats and other changes to boost the stock price. At the start of 2024, Shake Shack Inc. (NYSE:SHAK) was up by more than 130% over the past 12 months, attributed to investors reacting to a return to profitability and sales growth. Shake Shack Inc. (NYSE:SHAK) delivered a profit of $16.2 million in 2023, an improvement from a net loss between 2020 and 2022, hurt by the pandemic slowdown.

An analysis of the Insider Monkey Database indicates that hedge funds have been building up stakes in Shake Shack Inc. (NYSE:SHAK). As of the end of the first quarter, 34 hedge funds out of 920 tracked held stakes in the company, an improvement from 28 as of the end of 2023.

Here is what Alger Small Cap Growth Fund said about Shake Shack Inc. (NYSE:SHAK) in its first quarter 2024 investor letter:

“Shake Shack Inc. (NYSE:SHAK) is an elevated take on classic American cuisine. The company uses high-quality ingredients to craft Angus beef burgers, crinkle-cut fries, crispy chicken, and hot dogs. The company serves a full complement of beverages including house- made lemonade, hand-spun milkshakes, beer, wine, and soft drinks. During the quarter, shares contributed to performance after the company reported strong fiscal fourth quarter results, where earnings beat analyst estimates due to increasing restaurant level operating margins and strong same store sales above consensus, driven by better price mix and increased traffic. Moreover, management gave initial 2024 guidance with revenues in-line with consensus but higher-than-expected earnings, underscoring the company’s recent focus on streamlining operations by leveraging technology investment. Separately, following their fiscal fourth quarter earnings report, Shake Shack announced Rob Lynch as the incoming CEO. effective May 2024, succeeding Randy Garutti upon his retirement. Lynch, the former CEO of Papa John’s, is credited with revitalizing the brand post-2018 and has held senior marketing positions at several other top restaurant chains. With management executing well on its expansion plan to add 80 new restaurants in 2024, many of which with newly implemented drive-through windows, we believe the company remains well positioned for long-term growth potential.”