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Hedge Funds Are Crazy About The Cheesecake Factory Incorporated (NASDAQ:CAKE) – Bloomin’ Brands Inc (NASDAQ:BLMN), The Wendy’s Company (NASDAQ:WEN)

The Cheesecake Factory Incorporated (NASDAQ:CAKE) was in 13 hedge funds’ portfolio at the end of the fourth quarter of 2012. CAKE investors should be aware of an increase in enthusiasm from smart money lately. There were 12 hedge funds in our database with CAKE positions at the end of the previous quarter.

To most investors, hedge funds are seen as underperforming, old financial tools of the past. While there are over 8000 funds trading at present, we at Insider Monkey look at the elite of this group, close to 450 funds. Most estimates calculate that this group has its hands on the majority of all hedge funds’ total capital, and by monitoring their best stock picks, we have figured out a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per 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 topped the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

The Cheesecake Factory Incorporated (NASDAQ:CAKE)

Equally as integral, optimistic insider trading sentiment is a second way to parse down the marketplace. Obviously, there are a number of incentives for a bullish insider to sell shares of his or her company, but just one, very clear reason why they would buy. Plenty of empirical studies have demonstrated the market-beating potential of this method if investors know what to do (learn more here).

With these “truths” under our belt, let’s take a look at the key action surrounding The Cheesecake Factory Incorporated (NASDAQ:CAKE).

Hedge fund activity in The Cheesecake Factory Incorporated (NASDAQ:CAKE)

Heading into 2013, a total of 13 of the hedge funds we track were long in this stock, a change of 8% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully.

When looking at the hedgies we track, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in The Cheesecake Factory Incorporated (NASDAQ:CAKE). GAMCO Investors has a $35 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which held a $13 million position; the fund has 0% of its 13F portfolio invested in the stock. Some other hedge funds that hold long positions include Brett Barakett’s Tremblant Capital, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.

As one would reasonably expect, some big names were breaking ground themselves. Whitebox Advisors, managed by Andy Redleaf, initiated the largest position in The Cheesecake Factory Incorporated (NASDAQ:CAKE). Whitebox Advisors had 1 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $1 million investment in the stock during the quarter. The following funds were also among the new CAKE investors: Mike Vranos’s Ellington, Paul Tudor Jones’s Tudor Investment Corp, and Ken Gray and Steve Walsh’s Bryn Mawr Capital.

What have insiders been doing with The Cheesecake Factory Incorporated (NASDAQ:CAKE)?

Insider purchases made by high-level executives is at its handiest when the primary stock in question has seen transactions within the past 180 days. Over the last six-month time frame, The Cheesecake Factory Incorporated (NASDAQ:CAKE) has seen 3 unique insiders buying, and 4 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to The Cheesecake Factory Incorporated (NASDAQ:CAKE). These stocks are Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Bloomin’ Brands Inc (NASDAQ:BLMN), The Wendy’s Company (NASDAQ:WEN), Buffalo Wild Wings (NASDAQ:BWLD), and Brinker International, Inc. (NYSE:EAT). This group of stocks are in the restaurants industry and their market caps are similar to CAKE’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) 14 2 3
Bloomin’ Brands Inc (NASDAQ:BLMN) 9 0 0
The Wendy’s Company (NASDAQ:WEN) 15 0 0
Buffalo Wild Wings (NASDAQ:BWLD) 17 0 9
Brinker International, Inc. (NYSE:EAT) 17 1 5

With the returns exhibited by the aforementioned studies, everyday investors must always monitor hedge fund and insider trading activity, and The Cheesecake Factory Incorporated (NASDAQ:CAKE) applies perfectly to this mantra.

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Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.