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Hedge Funds Lose Interest In Noodles & Co (NDLS)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Noodles & Co (NASDAQ:NDLS) based on that data.

Noodles & Co (NASDAQ:NDLS) investors should be aware of a decrease in hedge fund interest in recent months. NDLS was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 16 hedge funds in our database with NDLS positions at the end of the previous quarter. Our calculations also showed that NDLS 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TUDOR INVESTMENT CORP

Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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 we’re going to analyze the recent hedge fund action encompassing Noodles & Co (NASDAQ:NDLS).

Hedge fund activity in Noodles & Co (NASDAQ:NDLS)

At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in NDLS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Woodson Capital Management held the most valuable stake in Noodles & Co (NASDAQ:NDLS), which was worth $16.5 million at the end of the third quarter. On the second spot was Tenzing Global Investors which amassed $10.4 million worth of shares. Isomer Partners, Rip Road Capital, and Prospector Partners 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 Tenzing Global Investors allocated the biggest weight to Noodles & Co (NASDAQ:NDLS), around 5.72% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, earmarking 4.36 percent of its 13F equity portfolio to NDLS.

Because Noodles & Co (NASDAQ:NDLS) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of money managers that elected to cut their positions entirely by the end of the first quarter. It’s worth mentioning that Mark Coe’s Intrinsic Edge Capital said goodbye to the largest position of all the hedgies monitored by Insider Monkey, worth about $2.5 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $0.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Noodles & Co (NASDAQ:NDLS). We will take a look at Arcturus Therapeutics Holdings Inc. (NASDAQ:ARCT), Lindblad Expeditions Holdings Inc (NASDAQ:LIND), ChannelAdvisor Corp (NYSE:ECOM), and Glory Star New Media Group Holdings Limited (NASDAQ:GSMG). All of these stocks’ market caps are closest to NDLS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARCT 11 10368 0
LIND 16 54685 -3
ECOM 11 27999 -1
GSMG 9 1738 -1
Average 11.75 23698 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $52 million in NDLS’s case. Lindblad Expeditions Holdings Inc (NASDAQ:LIND) is the most popular stock in this table. On the other hand Glory Star New Media Group Holdings Limited (NASDAQ:GSMG) is the least popular one with only 9 bullish hedge fund positions. Noodles & Co (NASDAQ:NDLS) 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on NDLS, though not to the same extent, as the stock returned 23.4% during the first two months and twenty five days of the second quarter and outperformed the market as well.

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