Should You Avoid Ruby Tuesday, Inc. (RT)?

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Should Ruby Tuesday, Inc. (NYSE:RT) investors track the following data?

If you were to ask many investors, hedge funds are seen as overrated, old investment tools of a forgotten age. Although there are In excess of 8,000 hedge funds with their doors open today, Insider Monkey looks at the elite of this group, around 525 funds. Analysts calculate that this group has its hands on the majority of the hedge fund industry’s total assets, and by watching their best picks, we’ve figured out a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).

Just as crucial, optimistic insider trading sentiment is a second way to look at the investments you’re interested in. As the old adage goes: there are a variety of incentives for an upper level exec to cut shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the useful potential of this strategy if “monkeys” know where to look (learn more here).

Ruby Tuesday, Inc. (NYSE:RT)

Now that that’s out of the way, let’s examine the latest info about Ruby Tuesday, Inc. (NYSE:RT).

How are hedge funds trading Ruby Tuesday, Inc. (NYSE:RT)?

At Q2’s end, a total of 10 of the hedge funds we track were bullish in this stock, a change of -9% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly.

According to our 13F database, Clint Carlson’s Carlson Capital had the largest position in Ruby Tuesday, Inc. (NYSE:RT), worth close to $25 million, comprising 0.3% of its total 13F portfolio. On Carlson Capital’s heels is Matthew Drapkin and Steven R. Becker of Becker Drapkin Management, with a $13.4 million position; 9.6% of its 13F portfolio is allocated to the stock. Other hedgies that are bullish include Chuck Royce’s Royce & Associates, Joel Greenblatt’s Gotham Asset Management and Israel Englander’s Millennium Management.

Because Ruby Tuesday, Inc. (NYSE:RT) has witnessed dropping sentiment from the smart money’s best and brightest, logic holds that there is a sect of hedge funds that elected to cut their positions entirely heading into Q2. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest stake of all the hedgies we key on, totaling about $0.4 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also said goodbye to its stock, about $0.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q2.

What have insiders been doing with Ruby Tuesday, Inc. (NYSE:RT)?

Legal insider trading, particularly when it’s bullish, is at its handiest when the company we’re looking at has experienced transactions within the past six months. Over the latest half-year time frame, Ruby Tuesday, Inc. (NYSE:RT) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Ruby Tuesday, Inc. (NYSE:RT). These stocks are Ignite Restaurant Group Inc (NASDAQ:IRG), Chuy’s Holdings Inc (NASDAQ:CHUY), Denny’s Corporation (NASDAQ:DENN), Biglari Holdings Inc (NYSE:BH), and Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG). This group of stocks are in the restaurants industry and their market caps are closest to RT’s market cap.

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