Is Texas Roadhouse Inc (TXRH) Going to Burn These Hedge Funds?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Is Texas Roadhouse Inc (NASDAQ:TXRH) a worthy investment now? Prominent investors are getting less optimistic. The number of bullish hedge fund positions decreased by 8 recently. At the end of this article we will also compare TXRH to other stocks including PolyOne Corporation (NYSE:POL), Woodward Inc (NASDAQ:WWD), and Artisan Partners Asset Management Inc (NYSE:APAM) to get a better sense of its popularity.

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With all of this in mind, we’re going to take a look at the fresh action encompassing Texas Roadhouse Inc (NASDAQ:TXRH).

Hedge fund activity in Texas Roadhouse Inc (NASDAQ:TXRH)

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from the second quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Steven Richman’s East Side Capital (RR Partners) has the number one position in Texas Roadhouse Inc (NASDAQ:TXRH), worth close to $43.6 million, corresponding to 1.9% of its total 13F portfolio. Sitting at the No. 2 spot is Point72 Asset Management, managed by Steve Cohen, which holds an $24.7 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism consist of Ken Griffin’s Citadel Investment Group, Dmitry Balyasny’s Balyasny Asset Management and Drew Cupps’s Cupps Capital Management.

Because Texas Roadhouse Inc (NASDAQ:TXRH) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds that decided to sell off their full holdings last quarter. Intriguingly, Andrew Sandler’s Sandler Capital Management sold off the largest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $8.8 million in stock. Leon Shaulov’s fund, Maplelane Capital, also dropped its stock, about $4.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 8 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Texas Roadhouse Inc (NASDAQ:TXRH). These stocks are PolyOne Corporation (NYSE:POL), Woodward Inc (NASDAQ:WWD), Artisan Partners Asset Management Inc (NYSE:APAM), and Clear Channel Outdoor Holdings, Inc. (NYSE:CCO). All of these stocks’ market caps match TXRH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
POL 11 18326 -1
WWD 12 134005 1
APAM 10 103560 0
CCO 18 102791 0

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $156 million in TXRH’s case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Artisan Partners Asset Management Inc (NYSE:APAM) is the least popular one with only 10 bullish hedge fund positions. Texas Roadhouse Inc (NASDAQ:TXRH) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CCO might be a better candidate to consider a long position.