Is Ruth’s Hospitality Group (RUTH) A Good Stock To Buy?

Is Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Ruth’s Hospitality Group (NASDAQ:RUTH) a good stock to buy now? Hedge funds were becoming less confident. The number of bullish hedge fund bets decreased by 3 lately. Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that RUTH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Price MFP Investors

Michael Price of MFP Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to go over the key hedge fund action surrounding Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH).

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

Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the second quarter of 2020. On the other hand, there were a total of 17 hedge funds with a bullish position in RUTH a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, North Peak Capital held the most valuable stake in Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), which was worth $20.8 million at the end of the third quarter. On the second spot was MFP Investors which amassed $6.9 million worth of shares. Royce & Associates, GLG Partners, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), around 3.97% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, designating 1.26 percent of its 13F equity portfolio to RUTH.

Since Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) has experienced falling interest from the smart money, it’s easy to see that there were a few hedgies who sold off their entire stakes last quarter. Interestingly, Israel Englander’s Millennium Management dropped the largest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $3.1 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund cut about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) but similarly valued. These stocks are Resolute Forest Products Inc (NYSE:RFP), Chuy’s Holdings Inc (NASDAQ:CHUY), Athersys, Inc. (NASDAQ:ATHX), Immunic, Inc. (NASDAQ:IMUX), Ducommun Incorporated (NYSE:DCO), Barings BDC, Inc. (NYSE:BBDC), and Central Pacific Financial Corp. (NYSE:CPF). This group of stocks’ market values are similar to RUTH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RFP 13 170346 5
CHUY 14 33441 -2
ATHX 6 2425 -4
IMUX 8 23977 -1
DCO 9 36746 1
BBDC 9 21050 1
CPF 14 42376 -2
Average 10.4 47194 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $39 million in RUTH’s case. Chuy’s Holdings Inc (NASDAQ:CHUY) is the most popular stock in this table. On the other hand Athersys, Inc. (NASDAQ:ATHX) is the least popular one with only 6 bullish hedge fund positions. Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RUTH is 52.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on RUTH as the stock returned 49.5% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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