We analyze hundreds of 13F filings from hedge funds and other notable investors to develop investment strategies and provide other useful information to investors. For example, we have found that the most popular small cap stocks among hedge funds outperform the S&P 500 by an average of 18 percentage points per year (learn more about our small cap strategy). We can also use our database to find which are the most popular stocks among hedge funds in different industries. Throughout the relatively weak recovery, U.S. restaurants- particularly quick service restaurants- have been one bright spot with significant increases in employment. Based on the number of filers we track in our database which were long the stock, here are the ten most popular restaurant stocks among hedge funds:
McDonald’s Corporation (NYSE:MCD) barely edged out Starbucks Corporation (NASDAQ:SBUX) to keep its place as the most popular restaurant stock among hedge funds with 47 filers in our database reporting a position. McDonalds offers a dividend yield above 3% though the company’s growth has been only modest and the trailing earnings multiple is in the high teens. The Bill and Melinda Gates Foundation Trust owned 9.9 million shares of McDonalds at the end of December (see what else the trust is invested in).
46 hedge funds and other notable investors we track owned shares of Starbucks, up from 43 at the end of September. Billionaire Steve Cohen’s SAC Capital Advisors more than doubled the size of its position in Starbucks in the fourth quarter of 2012 (find Cohen’s favorite stocks). Starbucks, despite its near ubiquity in many U.S. cities, is planning continued expansion and has been recording solid growth numbers.
A few hedge funds sold out of Yum! Brands, Inc. (NYSE:YUM), with 31 of them being long at the end of 2012. Chilton Investment Company, managed by Richard Chilton, was bucking the more general trend and actually bought shares of Yum last quarter (check out Chilton’s stock picks).
Upscale quick service restaurants are apparently popular: hedge fund ownership of Panera Bread Co (NASDAQ:PNRA) was increasing as well as of Starbucks. Renaissance Technologies, whose success has made founder Jim Simons a multi-billionaire, was the largest holder of the stock in our database (research more stocks Renaissance likes).
Ownership of Dunkin Brands Group Inc (NASDAQ:DNKN) plunged from 30 filers at the beginning of October to 20 in this round of 13Fs as many investors lost confidence in the expanding company. Billionaire George Soros, for example, sold all of his shares in Dunkin (find out what other stocks Soros has been trading).
Find out which restaurant tumbled from 5th to 7th place in popularity among hedge funds:
DineEquity Inc (NYSE:DIN), the owner of Applebee’s and IHOP, had 19 hedge funds and other notable investors report owning shares in this round of 13Fs. Among them was Richard McGuire’s Marcato Capital Management, which increased its holdings of DineEquity by 32% to over 1 million shares.
Hedge funds were cool on the formerly high-flying Chipotle Mexican Grill, Inc. (NYSE:CMG) as their ownership declined from 24 filers to 18 and pulled the Mexican restaurant out of the top five. Billionaire David Einhorn of Greenlight Capital named Chipotle as one of his favorite shorts last October (see Einhorn’s stock picks).
One table-service restaurant that got increased attention from hedge funds was Darden Restaurants, Inc. (NYSE:DRI). We counted 18 owners of Darden in our database, up from 10 at the end of the third quarter. Citadel Investment Group, managed by billionaire Ken Griffin, was buying shares (find more stocks Griffin bought).
Brinker International, Inc. (NYSE:EAT) was another restaurant stock which made our list despite not being a quick service restaurant. AQR Capital Management, which is managed by Cliff Asness, owned almost 630,000 shares of the restaurant which is best known as the owner of Chili’s (check out more stocks AQR owned).
Ownership of Buffalo Wild Wings (NASDAQ:BWLD) ticked up a bit to 17 hedge funds and other notable investors in our database. Tiger Consumer Management increased its holdings of Buffalo Wild Wings by 6% to a total of almost 900,000 shares.
Disclosure: I own no shares of any stocks mentioned in this article.
