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Alger: “Shake Shack (SHAK) is Currently Positioned to Benefit From a Strong Online Presence”

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Jose Karlo Mari Tottoc
·4 min read
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Alger, an investment management firm, published its “Alger Small Cap Focus Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. During the quarter, the largest portfolio sector weightings were Health Care and Information Technology. The largest sector overweight was Health Care. Class A shares of the Alger Small Cap Focus Fund underperformed the Russell 2000 Growth Index during the first quarter of 2021. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Alger Small Cap Focus Fund, in their Q1 2021 investor letter, mentioned Shake Shack Inc. (NYSE: SHAK) and shared their insights on the company. Shake Shack Inc. is a New York-based fast casual restaurant chain that currently has a $4.9 billion market capitalization. Since the beginning of the year, SHAK delivered a 37.74% return, extending its 12-month gains to 151.52%. As of April 16, 2021, the stock closed at $116.78 per share.

Here is what Alger Small Cap Focus Fund has to say about Shake Shack Inc. in their Q1 2021 investor letter:

"Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. Founded by Danny Meyer's Union Square Hospitality Group ("USHG"), Shake Shack was created by leveraging USHG's expertise in sourcing of premium ingredients, community building, hospitality, fine dining and restaurant operations. There are currently 311 locations, including restaurants i n 30 U.S. states and the District of Columbia and 105 international locations, such as London, Hong Kong, Shanghai , Singapore, Philippines, Mexico, Istanbul, Dubai, Tokyo, Seoul and more. Shares of Shake Shack outperformed in the first quarter due to a faster-than-expected sales recovery in suburban locations. During the final three months of 2020, suburban units saw flat comparable while urban units saw a decline of 31%. We believe investors have been looking for recovery stories in 2021 and Shake Shack has been a perfect blend of recovery with growth. We believe the company has potential to enter the post-pandemic months structurally stronger than prior to Covid-19 because the disruption in restaurant real estate could result in more favorable rental rates and tenant allowances, which could be beneficial to Shake Shack. Additionally, we believe the pandemic accelerated Shake Shack's digital efforts, so the company is currently positioned to benefit from a strong online presence. Digital was only 12% of sales in the early months of last year, but that increased to 59% as of the fourth quarter of 2020."

burger, chicken, sandwich, fish, french, closeup, meal, lettuce, bun, dinner, tasty, hamburger, cheese, background, bread, food, sauce, juicy, fries, american, white, red,
burger, chicken, sandwich, fish, french, closeup, meal, lettuce, bun, dinner, tasty, hamburger, cheese, background, bread, food, sauce, juicy, fries, american, white, red,

koss13/Shutterstock.com

Our calculations show that Shake Shack Inc. (NYSE: SHAK) 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, Shake Shack Inc. was in 25 hedge fund portfolios, compared to 26 funds in the third quarter. SHAK delivered a 4.96% 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.