The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Shake Shack Inc (NYSE:SHAK).
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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's review the fresh hedge fund action encompassing Shake Shack Inc (NYSE:SHAK).
What have hedge funds been doing with Shake Shack Inc (NYSE:SHAK)?
Heading into the fourth quarter of 2018, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in SHAK at the beginning of this year. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, 12 West Capital Management, managed by Joel Ramin, holds the biggest position in Shake Shack Inc (NYSE:SHAK). 12 West Capital Management has a $163.7 million position in the stock, comprising 12% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led by Jim Simons, holding a $51.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Robert Joseph Caruso's Select Equity Group, James Crichton's Hitchwood Capital Management and Ken Griffin's Citadel Investment Group.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Element Capital Management, managed by Jeffrey Talpins, established the most outsized position in Shake Shack Inc (NYSE:SHAK). Element Capital Management had $4.6 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also initiated a $1.3 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp and David Andre and Astro Teller's Cerebellum Capital.
Let's go over hedge fund activity in other stocks similar to Shake Shack Inc (NYSE:SHAK). We will take a look at Avalara, Inc. (NYSE:AVLR), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Patterson Companies, Inc. (NASDAQ:PDCO), and Scientific Games Corp (NASDAQ:SGMS). This group of stocks' market valuations match SHAK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVLR,15,595541,1 PPBI,9,105444,-1 PDCO,29,285433,1 SGMS,25,714551,-5 Average,19.5,425242,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $294 million in SHAK's case. Patterson Companies, Inc. (NASDAQ:PDCO) is the most popular stock in this table. On the other hand Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is the least popular one with only 9 bullish hedge fund positions. Shake Shack Inc (NYSE:SHAK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard PDCO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.