Hedge Funds Never Been Less Bullish On Brinker International, Inc. (EAT)

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 Brinker International, Inc. (NYSE:EAT) based on that data.

Is Brinker International, Inc. (NYSE:EAT) ready to rally soon? The best stock pickers are getting less optimistic. The number of bullish hedge fund bets shrunk by 5 in recent months. Our calculations also showed that EAT 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). EAT was in 16 hedge funds’ portfolios at the end of the first quarter of 2020. There were 21 hedge funds in our database with EAT holdings at the end of the previous quarter.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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. Now let’s take a gander at the recent hedge fund action encompassing Brinker International, Inc. (NYSE:EAT).

How are hedge funds trading Brinker International, Inc. (NYSE:EAT)?

At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. On the other hand, there were a total of 29 hedge funds with a bullish position in EAT a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of Brinker International, Inc. (NYSE:EAT), with a stake worth $12.9 million reported as of the end of September. Trailing Citadel Investment Group was Arrowstreet Capital, which amassed a stake valued at $11.7 million. AQR Capital Management, D E Shaw, and Diametric 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 Diametric Capital allocated the biggest weight to Brinker International, Inc. (NYSE:EAT), around 2.37% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to EAT.

Because Brinker International, Inc. (NYSE:EAT) has experienced declining sentiment from hedge fund managers, logic holds that there was a specific group of money managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors sold off the largest investment of all the hedgies watched by Insider Monkey, comprising an estimated $15.7 million in stock. George Baxter’s fund, Sabrepoint Capital, also cut its stock, about $9.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Brinker International, Inc. (NYSE:EAT). We will take a look at Apollo Investment Corp. (NASDAQ:AINV), Golden Ocean Group Ltd (NASDAQ:GOGL), Global Medical REIT Inc. (NYSE:GMRE), and Patterson-UTI Energy, Inc. (NASDAQ:PTEN). This group of stocks’ market valuations are similar to EAT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AINV 10 19432 1
GOGL 8 140504 -1
GMRE 10 13400 1
PTEN 20 70412 -9
Average 12 60937 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $47 million in EAT’s case. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is the most popular stock in this table. On the other hand Golden Ocean Group Ltd (NASDAQ:GOGL) is the least popular one with only 8 bullish hedge fund positions. Brinker International, Inc. (NYSE:EAT) 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 EAT as the stock returned 94.9% in Q2 (through June 25th) 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.