Ruth’s Hospitality Group, Inc. (RUTH): Are Hedge Funds Right About This Stock?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH)?

Is Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) a buy, sell, or hold? Money managers are getting more bullish. The number of long hedge fund positions rose by 2 in recent months. Our calculations also showed that RUTH 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). RUTH was in 16 hedge funds’ portfolios at the end of March. There were 14 hedge funds in our database with RUTH positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely 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, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the new hedge fund action surrounding Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH).

What have hedge funds been doing with Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH)?

At Q1’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in RUTH a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) was held by Millennium Management, which reported holding $4.2 million worth of stock at the end of September. It was followed by North Peak Capital with a $3.3 million position. Other investors bullish on the company included Royce & Associates, GLG Partners, and Winton Capital Management. 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 1.61% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, earmarking 0.09 percent of its 13F equity portfolio to RUTH.

As industrywide interest jumped, key money managers have been driving this bullishness. North Peak Capital, managed by Michael Kahan and Jeremy Kahan, initiated the most valuable position in Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH). North Peak Capital had $3.3 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.4 million position during the quarter. The other funds with new positions in the stock are Michael Price’s MFP Investors and Brett Hendrickson’s Nokomis Capital.

Let’s also examine 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 Orchid Island Capital, Inc. (NYSE:ORC), ECMOHO Limited (NASDAQ:MOHO), XOMA Corp (NASDAQ:XOMA), and Berry Corporation (NASDAQ:BRY). This group of stocks’ market caps resemble RUTH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ORC 8 11411 5
MOHO 1 94 0
XOMA 8 75782 -2
BRY 16 35516 -4
Average 8.25 30701 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $17 million in RUTH’s case. Berry Corporation (NASDAQ:BRY) is the most popular stock in this table. On the other hand ECMOHO Limited (NASDAQ:MOHO) is the least popular one with only 1 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 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on RUTH, though not to the same extent, as the stock returned 21.3% during the first two months and twenty five days of the second quarter and outperformed the market as well.

Follow Ruths Hospitality Group Inc. (NASDAQ:RUTH)

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