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Red Robin Gourmet Burgers, Inc. (RRGB): Are Hedge Funds Right About This Stock?

Is Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) was in 15 hedge funds’ portfolios at the end of the third quarter of 2019. RRGB investors should pay attention to an increase in enthusiasm from smart money of late. There were 12 hedge funds in our database with RRGB positions at the end of the previous quarter. Our calculations also showed that RRGB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Eric Singer VIEX Capital

Eric Singer of VIEX Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the new hedge fund action surrounding Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB).

How have hedgies been trading Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)?

Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RRGB over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is RRGB A Good Stock To Buy?

More specifically, VIEX Capital Advisors was the largest shareholder of Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), with a stake worth $11.6 million reported as of the end of September. Trailing VIEX Capital Advisors was Citadel Investment Group, which amassed a stake valued at $11.1 million. Coatue Management, Balyasny Asset Management, and GMT Capital 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 VIEX Capital Advisors allocated the biggest weight to Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), around 6.89% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, setting aside 0.77 percent of its 13F equity portfolio to RRGB.

As aggregate interest increased, specific money managers have been driving this bullishness. VIEX Capital Advisors, managed by Eric Singer, initiated the most outsized position in Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). VIEX Capital Advisors had $11.6 million invested in the company at the end of the quarter. Parvinder Thiara’s Athanor Capital also made a $2.7 million investment in the stock during the quarter. The other funds with brand new RRGB positions are Noam Gottesman’s GLG Partners, Bradley Louis Radoff’s Fondren Management, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). We will take a look at Weidai Ltd. (NYSE:WEI), Carrols Restaurant Group, Inc. (NASDAQ:TAST), Spartan Stores, Inc. (NASDAQ:SPTN), and XBiotech Inc. (NASDAQ:XBIT). This group of stocks’ market values are closest to RRGB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WEI 1 240 0
TAST 16 84722 -4
SPTN 18 39897 -2
XBIT 6 7161 -1
Average 10.25 33005 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $47 million in RRGB’s case. Spartan Stores, Inc. (NASDAQ:SPTN) is the most popular stock in this table. On the other hand Weidai Ltd. (NYSE:WEI) is the least popular one with only 1 bullish hedge fund positions. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RRGB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RRGB were disappointed as the stock returned -18% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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