Should You Consider Investing in The Cheesecake Factory (CAKE)?

Baron Funds, an asset management firm, published its “Baron Small Cap Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.67% was delivered by the fund’s institutional shares for the Q1 of 2021, trailing the S&P 500 Index, which appreciated 6.17%, and modestly underperforming the Russell 2000 Growth Index which rose 4.88% for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Baron Small Cap Fund, in its Q1 2021 investor letter, mentioned The Cheesecake Factory Incorporated (NASDAQ: CAKE), and shared their insights on the company. The Cheesecake Factory Incorporated is a Calabasas, California-based restaurant company that currently has a $2.7 billion market capitalization. Since the beginning of the year, CAKE delivered a 60.01% return, extending its 12-month gains to 220.28%. As of May 14, 2021, the stock closed at $59.30 per share.

Here is what Baron Small Cap Fund has to say about The Cheesecake Factory Incorporated in its Q1 2021 investor letter:

“Shares of The Cheesecake Factory, Inc., the operator of casual dining restaurants, were up significantly in the first quarter, as their dining rooms reopened, and business recovered from the depths caused by COVID restrictions. We believe that the company weathered the downturn very well and emerged a stronger, more profitable entity, with an improved outlook. Off Premise sales were robust during the shutdown, and we believe that a good portion of those sales will be retained, so that each restaurant will do more revenue than before. We expect about 15% of restaurants in the casual dining space will be shuttered forever, which will help Cheesecake’s volumes and already strong competitive position. And we are excited about the opportunity for it to grow units, especially in the North Italia and Fox brands, which the company acquired prior to COVID. However, with the stock quadrupling off the bottom and back to its highs of five years ago, and trading at a good multiple of our expectation of near-term earnings, we sold about a third of our position into strength.”

Our calculations show that The Cheesecake Factory Incorporated (NASDAQ: CAKE) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, The Cheesecake Factory Incorporated was in 18 hedge fund portfolios, compared to 25 funds in the third quarter. CAKE delivered an 18.58% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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