Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
The Habit Restaurants, Inc. (NASDAQ:HABT) has experienced an increase in enthusiasm from smart money lately. Our calculations also showed that HABT isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
Let's review the latest hedge fund action encompassing The Habit Restaurants, Inc. (NASDAQ:HABT).
What have hedge funds been doing with The Habit Restaurants, Inc. (NASDAQ:HABT)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HABT over the last 15 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in The Habit Restaurants, Inc. (NASDAQ:HABT), which was worth $15.9 million at the end of the first quarter. On the second spot was Greenhouse Funds which amassed $10.7 million worth of shares. Moreover, Marshall Wace LLP, Two Sigma Advisors, and Millennium Management were also bullish on The Habit Restaurants, Inc. (NASDAQ:HABT), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, some big names were breaking ground themselves. GLG Partners, managed by Noam Gottesman, initiated the most valuable position in The Habit Restaurants, Inc. (NASDAQ:HABT). GLG Partners had $0.3 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle's Springbok Capital also initiated a $0.1 million position during the quarter.
Let's go over hedge fund activity in other stocks similar to The Habit Restaurants, Inc. (NASDAQ:HABT). We will take a look at Tarena International Inc (NASDAQ:TEDU), Lawson Products, Inc. (NASDAQ:LAWS), Ceragon Networks Ltd. (NASDAQ:CRNT), and Tecnoglass Inc. (NASDAQ:TGLS). This group of stocks' market valuations are similar to HABT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEDU,8,9658,1 LAWS,4,9838,0 CRNT,6,22142,-3 TGLS,7,13625,3 Average,6.25,13816,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $45 million in HABT's case. Tarena International Inc (NASDAQ:TEDU) is the most popular stock in this table. On the other hand Lawson Products, Inc. (NASDAQ:LAWS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks The Habit Restaurants, Inc. (NASDAQ:HABT) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HABT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HABT were disappointed as the stock returned -5.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.