Is Arcos Dorados Holding Inc (ARCO) Going to Burn These Hedge Funds? – Bloomin’ Brands Inc (BLMN), The Wendy’s Company (WEN)

Arcos Dorados Holding Inc (NYSE:ARCO) was in 9 hedge funds’ portfolio at the end of December. ARCO has experienced a decrease in enthusiasm from smart money of late. There were 14 hedge funds in our database with ARCO positions at the end of the previous quarter.

Arcos Dorados Holding Inc (NYSE:ARCO)

According to most traders, hedge funds are assumed to be underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation at present, we at Insider Monkey look at the top tier of this group, around 450 funds. It is estimated that this group has its hands on the majority of all hedge funds’ total capital, and by paying attention to their top equity investments, we have deciphered a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Equally as key, optimistic insider trading activity is a second way to break down the financial markets. Just as you’d expect, there are lots of reasons for an insider to cut shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this strategy if piggybackers understand what to do (learn more here).

With all of this in mind, let’s take a gander at the latest action regarding Arcos Dorados Holding Inc (NYSE:ARCO).

What does the smart money think about Arcos Dorados Holding Inc (NYSE:ARCO)?

Heading into 2013, a total of 9 of the hedge funds we track were long in this stock, a change of -36% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably.

According to our comprehensive database, Scout Capital Management, managed by James Crichton and Adam Weiss, holds the largest position in Arcos Dorados Holding Inc (NYSE:ARCO). Scout Capital Management has a $23 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by Chase Coleman and Feroz Dewan of Tiger Global Management LLC, with a $15.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers that hold long positions include Stanley Druckenmiller’s Duquesne Capital, Charles Clough’s Clough Capital Partners and Howard Marks’s Oaktree Capital Management.

Because Arcos Dorados Holding Inc (NYSE:ARCO) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers who sold off their positions entirely at the end of the year. Interestingly, Lee Ainslie’s Maverick Capital cut the largest stake of the 450+ funds we key on, worth an estimated $103.4 million in stock.. Panayotis æTakisÆ Sparaggis’s fund, Alkeon Capital Management, also sold off its stock, about $24.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds at the end of the year.

What do corporate executives and insiders think about Arcos Dorados Holding Inc (NYSE:ARCO)?

Insider purchases made by high-level executives is particularly usable when the company in question has seen transactions within the past 180 days. Over the last six-month time period, Arcos Dorados Holding Inc (NYSE:ARCO) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Arcos Dorados Holding Inc (NYSE:ARCO). These stocks are The Cheesecake Factory Incorporated (NASDAQ:CAKE), Bloomin’ Brands Inc (NASDAQ:BLMN), The Wendy’s Company (NASDAQ:WEN), Domino’s Pizza, Inc. (NYSE:DPZ), and Brinker International, Inc. (NYSE:EAT). This group of stocks are the members of the restaurants industry and their market caps match ARCO’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
The Cheesecake Factory Incorporated (NASDAQ:CAKE) 13 3 4
Bloomin’ Brands Inc (NASDAQ:BLMN) 9 0 0
The Wendy’s Company (NASDAQ:WEN) 15 0 0
Domino’s Pizza, Inc. (NYSE:DPZ) 20 0 2
Brinker International, Inc. (NYSE:EAT) 17 1 6

With the results shown by the aforementioned strategies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and Arcos Dorados Holding Inc (NYSE:ARCO) is an important part of this process.

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