Is Chuy’s Holdings Inc (CHUY) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Chuy’s Holdings Inc (NASDAQ:CHUY) investors should be aware of an increase in hedge fund interest recently. There were 9 hedge funds in our database with CHUY holdings at the end of the previous quarter. At the end of this article we will also compare CHUY to other stocks including Citizens, Inc. (NYSE:CIA), FB Financial Corp(NYSE:FBK), and Blucora Inc (NASDAQ:BCOR) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

With all of this in mind, let’s review the recent action surrounding Chuy’s Holdings Inc (NASDAQ:CHUY).

Hedge fund activity in Chuy’s Holdings Inc (NASDAQ:CHUY)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of 22% from the second quarter of 2016. By comparison, 18 hedge funds held shares or bullish call options in CHUY heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Matthew A. Weatherbie’s Weatherbie Capital has the largest position in Chuy’s Holdings Inc (NASDAQ:CHUY), worth close to $11.8 million, amounting to 1.5% of its total 13F portfolio. On Weatherbie Capital’s heels is Manatuck Hill Partners, led by Mark Broach, which holds a $6.3 million position; 2.5% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions consist of Ken Griffin’s Citadel Investment Group and Matthew Hulsizer’s PEAK6 Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Citadel Investment Group  created the most valuable position in Chuy’s Holdings Inc (NASDAQ:CHUY). Citadel Investment Group had $2.4 million invested in the company at the end of the quarter. PEAK6 Capital Management also made a $1.7 million investment in the stock during the quarter. The other funds with brand new CHUY positions are Matthew Tewksbury’s Stevens Capital Management, Paul Tudor Jones’ Tudor Investment Corp, and D. E. Shaw’s D E Shaw, one of the largest hedge funds in the world.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Chuy’s Holdings Inc (NASDAQ:CHUY) but similarly valued. We will take a look at Citizens, Inc. (NYSE:CIA), FB Financial Corp(NYSE:FBK), Blucora Inc (NASDAQ:BCOR), and Career Education Corp. (NASDAQ:CECO). This group of stocks’ market valuations are similar to CHUY’s market valuation.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $27 million in CHUY’s case. Blucora Inc (NASDAQ:BCOR) is the most popular stock in this table. On the other hand Citizens, Inc. (NYSE:CIA) is the least popular one with only 6 bullish hedge fund positions. Chuy’s Holdings Inc (NASDAQ:CHUY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BCOR might be a better candidate to consider taking a long position in.

Disclosure: None