Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Chuy's Holdings Inc (NASDAQ:CHUY) in this article.
Chuy's Holdings Inc (NASDAQ:CHUY) shareholders have witnessed a decrease in enthusiasm from smart money of late. CHUY was in 10 hedge funds' portfolios at the end of September. There were 12 hedge funds in our database with CHUY positions at the end of the previous quarter. Our calculations also showed that CHUY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the recent hedge fund action surrounding Chuy's Holdings Inc (NASDAQ:CHUY).
How are hedge funds trading Chuy's Holdings Inc (NASDAQ:CHUY)?
At Q3's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in CHUY a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Empirical Capital Partners was the largest shareholder of Chuy's Holdings Inc (NASDAQ:CHUY), with a stake worth $7 million reported as of the end of September. Trailing Empirical Capital Partners was Renaissance Technologies, which amassed a stake valued at $6.5 million. D E Shaw, Citadel Investment Group, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Empirical Capital Partners allocated the biggest weight to Chuy's Holdings Inc (NASDAQ:CHUY), around 9.47% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to CHUY.
Seeing as Chuy's Holdings Inc (NASDAQ:CHUY) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers who were dropping their entire stakes last quarter. Intriguingly, Philippe Laffont's Coatue Management cut the largest position of the 750 funds monitored by Insider Monkey, valued at close to $2.3 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also said goodbye to its stock, about $0.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Chuy's Holdings Inc (NASDAQ:CHUY). These stocks are IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), Sierra Bancorp (NASDAQ:BSRR), Purple Innovation, Inc. (NASDAQ:PRPL), and Gladstone Investment Corporation (NASDAQ:GAIN). This group of stocks' market caps are similar to CHUY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IRCP,4,13177,0 BSRR,10,14970,3 PRPL,5,48660,2 GAIN,2,1970,-2 Average,5.25,19694,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $28 million in CHUY's case. Sierra Bancorp (NASDAQ:BSRR) is the most popular stock in this table. On the other hand Gladstone Investment Corporation (NASDAQ:GAIN) is the least popular one with only 2 bullish hedge fund positions. Chuy's Holdings Inc (NASDAQ:CHUY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on CHUY as the stock returned 16.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.