Hedge Funds Have Never Been This Bullish On Texas Roadhouse Inc (TXRH)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Texas Roadhouse Inc (NASDAQ:TXRH)?

Texas Roadhouse Inc (NASDAQ:TXRH) was in 27 hedge funds’ portfolios at the end of March. TXRH shareholders have witnessed an increase in hedge fund interest in recent months. There were 23 hedge funds in our database with TXRH holdings at the end of the previous quarter. Our calculations also showed that TXRH 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the new hedge fund action encompassing Texas Roadhouse Inc (NASDAQ:TXRH).

What does smart money think about Texas Roadhouse Inc (NASDAQ:TXRH)?

At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TXRH over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is TXRH A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Candlestick Capital Management, managed by Jack Woodruff, holds the number one position in Texas Roadhouse Inc (NASDAQ:TXRH). Candlestick Capital Management has a $23 million position in the stock, comprising 1% of its 13F portfolio. On Candlestick Capital Management’s heels is Citadel Investment Group, led by Ken Griffin, holding a $18.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain John Overdeck and David Siegel’s Two Sigma Advisors, Steve Cohen’s Point72 Asset Management and Richard Merage’s MIG Capital. In terms of the portfolio weights assigned to each position MIG Capital allocated the biggest weight to Texas Roadhouse Inc (NASDAQ:TXRH), around 1.54% of its 13F portfolio. Candlestick Capital Management is also relatively very bullish on the stock, dishing out 0.97 percent of its 13F equity portfolio to TXRH.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Candlestick Capital Management, managed by Jack Woodruff, created the largest position in Texas Roadhouse Inc (NASDAQ:TXRH). Candlestick Capital Management had $23 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $14.6 million investment in the stock during the quarter. The other funds with brand new TXRH positions are Richard Merage’s MIG Capital, Leon Shaulov’s Maplelane Capital, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks similar to Texas Roadhouse Inc (NASDAQ:TXRH). We will take a look at Verint Systems Inc. (NASDAQ:VRNT), Janus Henderson Group plc (NYSE:JHG), nVent Electric plc (NYSE:NVT), and Q2 Holdings Inc (NYSE:QTWO). All of these stocks’ market caps are closest to TXRH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRNT 17 205592 2
JHG 23 124117 5
NVT 29 453695 1
QTWO 18 217845 -2
Average 21.75 250312 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $147 million in TXRH’s case. nVent Electric plc (NYSE:NVT) is the most popular stock in this table. On the other hand Verint Systems Inc. (NASDAQ:VRNT) is the least popular one with only 17 bullish hedge fund positions. Texas Roadhouse Inc (NASDAQ:TXRH) is not the most popular stock in this group but hedge fund interest is still above 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on TXRH as the stock returned 25.5% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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