Were Hedge Funds Right About Souring On Habit Restaurants Inc (HABT)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Habit Restaurants Inc (NASDAQ:HABT).

Habit Restaurants Inc (NASDAQ:HABT) was in 12 hedge funds’ portfolios at the end of June. HABT shareholders have witnessed a decrease in support from the world’s most elite money managers lately. There were 14 hedge funds in our database with HABT holdings at the end of the previous quarter. Our calculations also showed that HABT isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

n addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let’s check out the latest hedge fund action surrounding Habit Restaurants Inc (NASDAQ:HABT).

What have hedge funds been doing with Habit Restaurants Inc (NASDAQ:HABT)?

Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in HABT a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).


Among these funds, Renaissance Technologies held the most valuable stake in Habit Restaurants Inc (NASDAQ:HABT), which was worth $17.4 million at the end of the second quarter. On the second spot was Greenhouse Funds which amassed $14.9 million worth of shares. Moreover, Millennium Management, Two Sigma Advisors, and Marshall Wace LLP were also bullish on Habit Restaurants Inc (NASDAQ:HABT), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Habit Restaurants Inc (NASDAQ:HABT) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds who sold off their full holdings by the end of the second quarter. Interestingly, D. E. Shaw’s D E Shaw said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $2.1 million in stock, and Mike Vranos’s Ellington was right behind this move, as the fund dumped about $0.7 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks similar to Habit Restaurants Inc (NASDAQ:HABT). We will take a look at Reliant Bancorp, Inc. (NASDAQ:RBNC), CapStar Financial Holdings, Inc. (NASDAQ:CSTR), Oil-Dri Corporation of America (NYSE:ODC), and FVCBankcorp, Inc. (NASDAQ:FVCB). This group of stocks’ market valuations are closest to HABT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RBNC 1 346 -1
CSTR 4 18034 -2
ODC 3 32544 0
FVCB 2 7616 -1
Average 2.5 14635 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $51 million in HABT’s case. CapStar Financial Holdings, Inc. (NASDAQ:CSTR) is the most popular stock in this table. On the other hand Reliant Bancorp, Inc. (NASDAQ:RBNC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Habit Restaurants Inc (NASDAQ:HABT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HABT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HABT were disappointed as the stock returned -16.7% during the third quarter 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 in Q3.

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