Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL).
Is Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) a worthy investment now? Hedge funds are in a pessimistic mood. The number of long hedge fund positions went down by 1 recently. Our calculations also showed that CBRL isn’t among the 30 most popular stocks among hedge funds (view the video below). CBRL was in 22 hedge funds’ portfolios at the end of June. There were 23 hedge funds in our database with CBRL positions at the end of the previous quarter.
Video: Click the image to 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 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the latest hedge fund action surrounding Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL).
What have hedge funds been doing with Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)?
At Q2’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CBRL over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). Arrowstreet Capital has a $49.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Marshall Wace LLP, managed by Paul Marshall and Ian Wace, which holds a $49.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Ken Griffin’s Citadel Investment Group, and Ken Griffin’s Citadel Investment Group.
Because Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has witnessed a decline in interest from the smart money, it’s easy to see that there were a few hedgies that decided to sell off their entire stakes in the second quarter. Intriguingly, D. E. Shaw’s D E Shaw dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at an estimated $2.2 million in stock. Minhua Zhang’s fund, Weld Capital Management, also cut its stock, about $1.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds in the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) but similarly valued. These stocks are Floor & Decor Holdings, Inc. (NYSE:FND), Lumentum Holdings Inc (NASDAQ:LITE), Wintrust Financial Corporation (NASDAQ:WTFC), and Repligen Corporation (NASDAQ:RGEN). This group of stocks’ market valuations are closest to CBRL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FND | 21 | 381803 | -10 |
| LITE | 30 | 341777 | -1 |
| WTFC | 23 | 394159 | 0 |
| RGEN | 22 | 167527 | 2 |
| Average | 24 | 321317 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $201 million in CBRL’s case. Lumentum Holdings Inc (NASDAQ:LITE) is the most popular stock in this table. On the other hand Floor & Decor Holdings, Inc. (NYSE:FND) is the least popular one with only 21 bullish hedge fund positions. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CBRL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CBRL investors were disappointed as the stock returned -2.4% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
