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Is BBQ Holdings, Inc. (BBQ) A Good Stock To Buy According To Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of BBQ Holdings, Inc. (NASDAQ:BBQ) based on that data.

BBQ Holdings, Inc. (NASDAQ:BBQ) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that BBQ 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 51 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Charles Davidson - Wexford Capital

Charles Davidson of Wexford Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the latest hedge fund action regarding BBQ Holdings, Inc. (NASDAQ:BBQ).

How have hedgies been trading BBQ Holdings, Inc. (NASDAQ:BBQ)?

Heading into the second quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the fourth quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in BBQ a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is BBQ A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Wexford Capital, managed by Charles Davidson and Joseph Jacobs, holds the biggest position in BBQ Holdings, Inc. (NASDAQ:BBQ). Wexford Capital has a $3.2 million position in the stock, comprising 1.2% of its 13F portfolio. On Wexford Capital’s heels is Bandera Partners, managed by Gregory Bylinsky and Jefferson Gramm, which holds a $2.8 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Bryant Regan’s Lafitte Capital Management and . In terms of the portfolio weights assigned to each position Bandera Partners allocated the biggest weight to BBQ Holdings, Inc. (NASDAQ:BBQ), around 2.34% of its 13F portfolio. Wexford Capital is also relatively very bullish on the stock, earmarking 1.2 percent of its 13F equity portfolio to BBQ.

As one would reasonably expect, key money managers have jumped into BBQ Holdings, Inc. (NASDAQ:BBQ) headfirst. Lafitte Capital Management, managed by Bryant Regan, assembled the largest position in BBQ Holdings, Inc. (NASDAQ:BBQ). Lafitte Capital Management had $0.1 million invested in the company at the end of the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as BBQ Holdings, Inc. (NASDAQ:BBQ) but similarly valued. These stocks are KLX Energy Services Holdings, Inc. (NASDAQ:KLXE), Lazydays Holdings, Inc. (NASDAQ:LAZY), Zion Oil & Gas Inc (NASDAQ:ZN), and Volt Information Sciences, Inc. (NYSE:VOLT). This group of stocks’ market values are similar to BBQ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KLXE 14 2577 -5
LAZY 5 3627 0
ZN 2 553 -1
VOLT 4 1236 -1
Average 6.25 1998 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $7 million in BBQ’s case. KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) is the most popular stock in this table. On the other hand Zion Oil & Gas Inc (NASDAQ:ZN) is the least popular one with only 2 bullish hedge fund positions. BBQ Holdings, Inc. (NASDAQ:BBQ) is not the least popular stock in this group but hedge fund interest is still below 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on BBQ as the stock returned 55.2% during the second quarter and outperformed the market by an even larger margin.

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