It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL).
Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) shareholders have witnessed a decrease in hedge fund sentiment lately. CBRL was in 19 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with CBRL holdings at the end of the previous quarter. At the end of this article we will also compare CBRL to other stocks, including Office Depot Inc (NYSE:ODP), Clovis Oncology Inc (NASDAQ:CLVS), and Rackspace Hosting, Inc. (NYSE:RAX) to get a better sense of its popularity.
In the eyes of most shareholders, hedge funds are seen as underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation at present, We hone in on the aristocrats of this club, around 700 funds. These investment experts handle most of all hedge funds’ total capital, and by tailing their matchless investments, Insider Monkey has discovered several investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Now, we’re going to analyze the new action encompassing Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL).
What does the smart money think about Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)?
At the Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Two Sigma Advisors, managed by John Overdeck and David Siegel, holds the biggest position in Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). Two Sigma Advisors has a $26.9 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Renaissance Technologies, holding an $18 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions contain Neil Chriss’s Hutchin Hill Capital, Andy Redleaf’s Whitebox Advisors and Cliff Asness’s AQR Capital Management.
Judging by the fact that Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has faced bearish sentiment from hedge fund managers, we can see that there is a sect of money managers who were dropping their entire stakes in the third quarter. Intriguingly, Peter Muller’s PDT Partners unloaded to the biggest investment of the 700 funds watched by Insider Monkey, comprising an estimated $4.8 million in stock. D. E. Shaw’s fund, D E Shaw, also said goodbye to its stock, about $2.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by three funds in the third 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 Office Depot Inc (NYSE:ODP), Clovis Oncology Inc (NASDAQ:CLVS), Rackspace Hosting, Inc. (NYSE:RAX), and Blue Buffalo Pet Products Inc (NASDAQ:BUFF). This group of stocks’ market valuations match CBRL’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $737 million. That figure was just $85 million in CBRL’s case. Office Depot Inc (NYSE:ODP) is the most popular stock in this table, while Blue Buffalo Pet Products Inc (NASDAQ:BUFF) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is even less popular than BUFF. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.