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Were Hedge Funds Right About Dumping Cracker Barrel Old Country Store, Inc. (CBRL)?

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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) changed recently.

Is Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) a good investment now? The smart money was getting less optimistic. The number of long hedge fund positions were cut by 10 in recent months. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) was in 16 hedge funds' portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that CBRL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 26 hedge funds in our database with CBRL holdings at the end of December.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

William Harnisch
William Harnisch

William Harnisch of Peconic Partners LLC

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind we're going to check out the new hedge fund action surrounding Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL).

Do Hedge Funds Think CBRL Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in CBRL over the last 23 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) was held by Melvin Capital Management, which reported holding $73.5 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $34.5 million position. Other investors bullish on the company included AQR Capital Management, Point72 Asset Management, and D E Shaw. In terms of the portfolio weights assigned to each position Peconic Partners LLC allocated the biggest weight to Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), around 1.21% of its 13F portfolio. Melvin Capital Management is also relatively very bullish on the stock, earmarking 0.42 percent of its 13F equity portfolio to CBRL.

Due to the fact that Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) has experienced a decline in interest from the smart money, it's easy to see that there were a few funds that decided to sell off their entire stakes by the end of the first quarter. Interestingly, D. E. Shaw's D E Shaw sold off the largest position of the 750 funds monitored by Insider Monkey, valued at an estimated $3.2 million in stock. Qing Li's fund, Sciencast Management, also dropped its stock, about $1.7 million worth. These moves are interesting, as total hedge fund interest was cut by 10 funds by the end of the first quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) but similarly valued. These stocks are The Goodyear Tire & Rubber Company (NASDAQ:GT), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Hudson Pacific Properties Inc (NYSE:HPP), ONE Gas Inc (NYSE:OGS), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), JFrog Ltd. (NASDAQ:FROG), and Covetrus, Inc. (NASDAQ:CVET). This group of stocks' market valuations match CBRL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GT,23,429776,-4 PPBI,10,139882,0 HPP,16,105147,-6 OGS,13,28456,1 TKC,8,28943,4 FROG,20,235381,4 CVET,17,143072,-2 Average,15.3,158665,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $164 million in CBRL's case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 8 bullish hedge fund positions. Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CBRL is 38.2. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately CBRL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CBRL were disappointed as the stock returned -19.2% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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