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Cracker Barrel Old Country Store, Inc. (CBRL): Hedge Funds Taking Some Chips Off The Table

Debasis Saha
·7 mins read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) based on that data and determine whether they were really smart about the stock.

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) was in 22 hedge funds' portfolios at the end of June. The all time high for this statistics is 24. CBRL investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 23 hedge funds in our database with CBRL positions at the end of the first quarter. Our calculations also showed that CBRL isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Lee Ainslie MAVERICK CAPITAL
Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to view the new hedge fund action encompassing Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL).

How have hedgies been trading Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL)?

Heading into the third quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CBRL over the last 20 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is CBRL A Good Stock To Buy?
Is CBRL A Good Stock To Buy?

Among these funds, Arrowstreet Capital held the most valuable stake in Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), which was worth $30.7 million at the end of the third quarter. On the second spot was Waratah Capital Advisors which amassed $29.7 million worth of shares. Select Equity Group, AQR Capital Management, and Renaissance Technologies 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 Waratah Capital Advisors allocated the biggest weight to Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), around 4.08% of its 13F portfolio. Cloverdale Capital Management is also relatively very bullish on the stock, dishing out 2.8 percent of its 13F equity portfolio to CBRL.

Judging by the fact that Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has faced bearish sentiment from hedge fund managers, it's safe to say that there was a specific group of fund managers that slashed their full holdings heading into Q3. Intriguingly, Brandon Haley's Holocene Advisors cut the largest position of the "upper crust" of funds monitored by Insider Monkey, totaling about $1.8 million in stock. Marc Majzner's fund, Clearline Capital, also dumped its stock, about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q3.

Let's go over hedge fund activity in other stocks similar to Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL). These stocks are SPS Commerce, Inc. (NASDAQ:SPSC), Mimecast Limited (NASDAQ:MIME), Brighthouse Financial, Inc. (NASDAQ:BHF), Diodes Incorporated (NASDAQ:DIOD), Manchester United PLC (NYSE:MANU), Green Dot Corporation (NYSE:GDOT), and Advanced Energy Industries, Inc. (NASDAQ:AEIS). This group of stocks' market valuations resemble CBRL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPSC,19,171817,3 MIME,34,256708,-5 BHF,34,332550,9 DIOD,14,78957,1 MANU,11,35251,3 GDOT,23,700625,1 AEIS,21,81139,7 Average,22.3,236721,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $192 million in CBRL's case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 11 bullish hedge fund positions. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CBRL is 55.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately CBRL wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CBRL investors were disappointed as the stock returned 4.5% in 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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