The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Fiesta Restaurant Group Inc (NASDAQ:FRGI) from the perspective of those elite funds.
Fiesta Restaurant Group Inc (NASDAQ:FRGI) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that frgi isn't among the 30 most popular stocks among hedge funds.
To most traders, hedge funds are perceived as slow, old investment tools of yesteryear. While there are over 8000 funds with their doors open at the moment, Our experts look at the masters of this group, about 750 funds. These investment experts handle bulk of the smart money's total capital, and by shadowing their inimitable stock picks, Insider Monkey has come up with a few investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points per annum since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
Let's view the latest hedge fund action encompassing Fiesta Restaurant Group Inc (NASDAQ:FRGI).
How are hedge funds trading Fiesta Restaurant Group Inc (NASDAQ:FRGI)?
Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in FRGI a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Leucadia National was the largest shareholder of Fiesta Restaurant Group Inc (NASDAQ:FRGI), with a stake worth $49.6 million reported as of the end of March. Trailing Leucadia National was Private Capital Management, which amassed a stake valued at $13 million. D E Shaw, Birch Run Capital, and Portolan Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Fiesta Restaurant Group Inc (NASDAQ:FRGI) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few hedgies who sold off their entire stakes heading into Q3. Intriguingly, Lee Ainslie's Maverick Capital cut the biggest position of all the hedgies followed by Insider Monkey, totaling about $2.7 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also sold off its stock, about $1.4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q3.
Let's also examine hedge fund activity in other stocks similar to Fiesta Restaurant Group Inc (NASDAQ:FRGI). These stocks are Motorcar Parts of America, Inc. (NASDAQ:MPAA), NI Holdings, Inc. (NASDAQ:NODK), Karyopharm Therapeutics Inc (NASDAQ:KPTI), and Jumei International Holding Ltd (NYSE:JMEI). This group of stocks' market values resemble FRGI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MPAA,9,93844,-1 NODK,6,24094,-1 KPTI,15,103954,-2 JMEI,3,10350,0 Average,8.25,58061,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $94 million in FRGI's case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Jumei International Holding Ltd (NYSE:JMEI) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Fiesta Restaurant Group Inc (NASDAQ:FRGI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on FRGI as the stock returned 6.8% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.