The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of The Cheesecake Factory Incorporated (NASDAQ:CAKE).
Is The Cheesecake Factory Incorporated (NASDAQ:CAKE) a healthy stock for your portfolio? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions dropped by 5 in recent months. Our calculations also showed that CAKE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_189632" align="aligncenter" width="400"] David Harding of Winton Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to go over the recent hedge fund action surrounding The Cheesecake Factory Incorporated (NASDAQ:CAKE).
How are hedge funds trading The Cheesecake Factory Incorporated (NASDAQ:CAKE)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in CAKE a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Prentice Capital Management, managed by Michael Zimmerman, holds the biggest position in The Cheesecake Factory Incorporated (NASDAQ:CAKE). Prentice Capital Management has a $10.3 million position in the stock, comprising 4.9% of its 13F portfolio. The second largest stake is held by Mario Gabelli of GAMCO Investors, with a $8.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism include Robert Pitts's Steadfast Capital Management, Ken Griffin's Citadel Investment Group and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to The Cheesecake Factory Incorporated (NASDAQ:CAKE), around 4.87% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, designating 2.68 percent of its 13F equity portfolio to CAKE.
Judging by the fact that The Cheesecake Factory Incorporated (NASDAQ:CAKE) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few hedgies that slashed their entire stakes by the end of the first quarter. Intriguingly, Noam Gottesman's GLG Partners cut the biggest investment of the "upper crust" of funds monitored by Insider Monkey, worth about $11.2 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund dropped about $7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 5 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks similar to The Cheesecake Factory Incorporated (NASDAQ:CAKE). We will take a look at Waddell & Reed Financial, Inc. (NYSE:WDR), Newmark Group, Inc. (NASDAQ:NMRK), Saul Centers Inc (NYSE:BFS), and Raven Industries, Inc. (NASDAQ:RAVN). This group of stocks' market valuations are similar to CAKE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WDR,22,73802,1 NMRK,24,66647,1 BFS,7,25019,-1 RAVN,11,73375,-2 Average,16,59711,-0.25 [/table]
View table here if you experience formatting issues.
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 $60 million. That figure was $66 million in CAKE's case. Newmark Group, Inc. (NASDAQ:NMRK) is the most popular stock in this table. On the other hand Saul Centers Inc (NYSE:BFS) is the least popular one with only 7 bullish hedge fund positions. The Cheesecake Factory Incorporated (NASDAQ:CAKE) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on CAKE as the stock returned 46.1% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.