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 first 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 4.5 years and analyze what the smart money thinks of Fiesta Restaurant Group Inc (NASDAQ:FRGI) based on that data and determine whether they were really smart about the stock.
Is Fiesta Restaurant Group Inc (NASDAQ:FRGI) a buy right now? The smart money was taking a pessimistic view. The number of long hedge fund bets fell by 2 lately. Our calculations also showed that FRGI isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_258236" align="aligncenter" width="396"] Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's analyze the fresh hedge fund action regarding Fiesta Restaurant Group Inc (NASDAQ:FRGI).
What have hedge funds been doing with Fiesta Restaurant Group Inc (NASDAQ:FRGI)?
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the fourth quarter of 2019. On the other hand, there were a total of 18 hedge funds with a bullish position in FRGI a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Leucadia National, managed by Ian Cumming and Joseph Steinberg, holds the most valuable position in Fiesta Restaurant Group Inc (NASDAQ:FRGI). Leucadia National has a $21.2 million position in the stock, comprising 28.3% of its 13F portfolio. The second most bullish fund manager is Andrew Rechtschaffen of AREX Capital Management, with a $10.1 million position; the fund has 11.8% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include Gregg J. Powers's Private Capital Management, D. E. Shaw's D E Shaw and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Leucadia National allocated the biggest weight to Fiesta Restaurant Group Inc (NASDAQ:FRGI), around 28.25% of its 13F portfolio. AREX Capital Management is also relatively very bullish on the stock, earmarking 11.82 percent of its 13F equity portfolio to FRGI.
Because Fiesta Restaurant Group Inc (NASDAQ:FRGI) has experienced falling interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers who sold off their positions entirely heading into Q4. Intriguingly, Gregory Bylinsky and Jefferson Gramm's Bandera Partners sold off the largest investment of the 750 funds followed by Insider Monkey, comprising close to $5 million in stock, and Daniel Beltzman and Gergory Smith's Birch Run Capital was right behind this move, as the fund cut about $4.3 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Fiesta Restaurant Group Inc (NASDAQ:FRGI). We will take a look at 22nd Century Group, Inc (NYSE:XXII), GasLog Partners LP (NYSE:GLOP), Citi Trends, Inc. (NASDAQ:CTRN), and MDC Partners Inc. (NASDAQ:MDCA). This group of stocks' market values match FRGI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XXII,1,384,0 GLOP,6,4758,-1 CTRN,15,18176,3 MDCA,9,18983,-2 Average,7.75,10575,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $44 million in FRGI's case. Citi Trends, Inc. (NASDAQ:CTRN) is the most popular stock in this table. On the other hand 22nd Century Group, Inc (NYSE:XXII) is the least popular one with only 1 bullish hedge fund positions. Fiesta Restaurant Group Inc (NASDAQ:FRGI) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on FRGI as the stock returned 58.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.