Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Is Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) a buy here? The smart money is certainly in a pessimistic mood. The number of bullish hedge fund bets that are revealed through the 13F filings dropped by 4 in recent months. RRGB was in 11 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with RRGB holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Seabridge Gold, Inc. (USA) (NYSE:SA), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), and Novanta Inc (USA) (NASDAQ:NOVT) to gather more data points.
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 take a peek at the key action surrounding Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB).
What have hedge funds been doing with Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RRGB over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, GMT Capital, led by Thomas E. Claugus, holds the number one position in Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). GMT Capital has a $13.3 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Alexander Mitchell of Scopus Asset Management, with a $10.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass Renaissance Technologies, one of the largest hedge funds in the world, Michael Barnes and Arif Inayatullah’s Tricadia Capital Management and Chuck Royce’s Royce & Associates. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.