Hedge Funds Are Nibbling On Chuy’s Holdings Inc (CHUY)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Chuy’s Holdings Inc (NASDAQ:CHUY) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Chuy’s Holdings Inc (NASDAQ:CHUY) has seen an increase in activity from the world’s largest hedge funds in recent months. CHUY was in 10 hedge funds’ portfolios at the end of March. There were 9 hedge funds in our database with CHUY positions at the end of the previous quarter. Our calculations also showed that CHUY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are a large number of gauges stock market investors employ to appraise publicly traded companies. A couple of the most under-the-radar gauges are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the top money managers can outperform the S&P 500 by a significant margin (see the details here).

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the key hedge fund action regarding Chuy’s Holdings Inc (NASDAQ:CHUY).

How have hedgies been trading Chuy’s Holdings Inc (NASDAQ:CHUY)?

Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in CHUY a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Chuy’s Holdings Inc (NASDAQ:CHUY), which was worth $3.7 million at the end of the third quarter. On the second spot was Empirical Capital Partners which amassed $2.9 million worth of shares. D E Shaw, Prescott Group Capital Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Empirical Capital Partners allocated the biggest weight to Chuy’s Holdings Inc (NASDAQ:CHUY), around 4.59% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, dishing out 0.81 percent of its 13F equity portfolio to CHUY.

As industrywide interest jumped, key money managers have jumped into Chuy’s Holdings Inc (NASDAQ:CHUY) headfirst. Prescott Group Capital Management, managed by Phil Frohlich, initiated the most outsized position in Chuy’s Holdings Inc (NASDAQ:CHUY). Prescott Group Capital Management had $1.6 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $0.9 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks similar to Chuy’s Holdings Inc (NASDAQ:CHUY). These stocks are X Financial (NYSE:XYF), Westwood Holdings Group, Inc. (NYSE:WHG), DermTech, Inc. (NASDAQ:DMTK), and Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR). This group of stocks’ market caps resemble CHUY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XYF 2 415 -1
WHG 9 26136 0
DMTK 5 18775 2
EIGR 27 64702 2
Average 10.75 27507 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $14 million in CHUY’s case. Eiger BioPharmaceuticals, Inc. (NASDAQ:EIGR) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CHUY as the stock returned 47.8% during the second quarter and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.