Here is What Hedge Funds Think About Texas Roadhouse Inc (TXRH)

In this article you are going to find out whether hedge funds think Texas Roadhouse Inc (NASDAQ:TXRH) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Texas Roadhouse Inc (NASDAQ:TXRH) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. Texas Roadhouse Inc (NASDAQ:TXRH) was in 36 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 37. Our calculations also showed that TXRH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a look at the key hedge fund action surrounding Texas Roadhouse Inc (NASDAQ:TXRH).

Do Hedge Funds Think TXRH Is A Good Stock To Buy Now?

At the end of September, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the second quarter of 2021. By comparison, 22 hedge funds held shares or bullish call options in TXRH a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Texas Roadhouse Inc (NASDAQ:TXRH) was held by Melvin Capital Management, which reported holding $369.9 million worth of stock at the end of September. It was followed by D1 Capital Partners with a $252.4 million position. Other investors bullish on the company included Melvin Capital Management, AQR Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Masterton Capital Management allocated the biggest weight to Texas Roadhouse Inc (NASDAQ:TXRH), around 3.46% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, dishing out 1.92 percent of its 13F equity portfolio to TXRH.

Since Texas Roadhouse Inc (NASDAQ:TXRH) has faced bearish sentiment from the smart money, logic holds that there is a sect of fund managers who sold off their full holdings in the third quarter. Intriguingly, Gregg Moskowitz’s Interval Partners cut the biggest investment of the 750 funds followed by Insider Monkey, worth close to $32.6 million in stock. Elise Di Vincenzo Crumbine’s fund, Stormborn Capital Management, also dropped its stock, about $5.8 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Texas Roadhouse Inc (NASDAQ:TXRH). These stocks are Petco Health and Wellness Company, Inc. (NASDAQ:WOOF), Stag Industrial Inc (NYSE:STAG), Inspire Medical Systems, Inc. (NYSE:INSP), CCC Intelligent Solutions Holdings Inc. (NYSE:CCCS), iQIYI, Inc. (NASDAQ:IQ), Kingsoft Cloud Holdings Limited (NASDAQ:KC), and HUTCHMED (China) Limited (NASDAQ:HCM). All of these stocks’ market caps match TXRH’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. That figure was $993 million in TXRH’s case. Inspire Medical Systems, Inc. (NYSE:INSP) is the most popular stock in this table. On the other hand HUTCHMED (China) Limited (NASDAQ:HCM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Texas Roadhouse Inc (NASDAQ:TXRH) is more popular among hedge funds. Our overall hedge fund sentiment score for TXRH is 83.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately TXRH wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TXRH were disappointed as the stock returned -9.2% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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