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Shake Shack Inc (SHAK): Hedge Funds Are Snapping Up

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the government. The 13F filings show the funds’ and investors’ portfolio positions as of September 30. In this article we look at what those investors think of Shake Shack Inc (NYSE:SHAK).

Is Shake Shack Inc (NYSE:SHAK) a good investment right now? The best stock pickers are in an optimistic mood. The number of bullish hedge fund bets rose by 4 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as HB Fuller Co (NYSE:FUL), Diamond Resorts International Inc (NYSE:DRII), and Marcus & Millichap Inc (NYSE:MMI) to gather more data points.

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To most traders, hedge funds are seen as unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds trading today, Our researchers look at the elite of this group, around 700 funds. These money managers control the majority of the hedge fund industry’s total asset base, and by shadowing their unrivaled picks, Insider Monkey has deciphered many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to check out the recent action encompassing Shake Shack Inc (NYSE:SHAK).

How are hedge funds trading Shake Shack Inc (NYSE:SHAK)?

Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the second quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, ZWEIG DIMENNA PARTNERS, managed by Joe DiMenna, holds the number one position in Shake Shack Inc (NYSE:SHAK). ZWEIG DIMENNA PARTNERS has an $6.8 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by John Tompkins of Tyvor Capital, with an $5.4 million position; 1.8% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Frank Slattery’s Symmetry Peak Management and Drew Cupps’s Cupps Capital Management.

As one would reasonably expect, key money managers were breaking ground themselves. ZWEIG DIMENNA PARTNERS established the most outsized position in Shake Shack Inc (NYSE:SHAK). The other funds with new positions in the stock are Frank Slattery’s Symmetry Peak Management, Drew Cupps’s Cupps Capital Management, and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks similar to Shake Shack Inc (NYSE:SHAK). These stocks are HB Fuller Co (NYSE:FUL), Diamond Resorts International Inc (NYSE:DRII), Marcus & Millichap Inc (NYSE:MMI), and Enbridge Energy Management, L.L.C. (NYSE:EEQ). All of these stocks’ market caps resemble SHAK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FUL 11 100580 2
DRII 32 288556 5
MMI 14 69692 -4
EEQ 7 27263 -3

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $122 million, compared to $29 million in SHAK’s case. Diamond Resorts International Inc (NYSE:DRII) is the most popular stock in this table. On the other hand Enbridge Energy Management, L.L.C. (NYSE:EEQ) is the least popular one with only 7 bullish hedge fund positions. Shake Shack Inc (NYSE:SHAK) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DRII might be a better candidate to consider a long position.

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