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Were Hedge Funds Right About Flocking Into On Texas Roadhouse Inc (TXRH) ?

Nina Todic

At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Is Texas Roadhouse Inc (NASDAQ:TXRH) ready to rally soon? Investors who are in the know are becoming hopeful. The number of long hedge fund positions improved by 6 in recent months. Our calculations also showed that txrh isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.

MILLENNIUM MANAGEMENT

We're going to review the latest hedge fund action surrounding Texas Roadhouse Inc (NASDAQ:TXRH).

What have hedge funds been doing with Texas Roadhouse Inc (NASDAQ:TXRH)?

At Q1's end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TXRH over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with TXRH Positions

According to Insider Monkey's hedge fund database, Millennium Management, managed by Israel Englander, holds the number one position in Texas Roadhouse Inc (NASDAQ:TXRH). Millennium Management has a $91.9 million position in the stock, comprising 0.1% of its 13F portfolio. On Millennium Management's heels is Marshall Wace LLP, led by Paul Marshall and Ian Wace, holding a $38.4 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ken Griffin's Citadel Investment Group and Jim Simons's Renaissance Technologies.

Consequently, key money managers were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most outsized position in Texas Roadhouse Inc (NASDAQ:TXRH). Balyasny Asset Management had $4.9 million invested in the company at the end of the quarter. Elise Di Vincenzo Crumbine's Stormborn Capital Management also initiated a $4.4 million position during the quarter. The following funds were also among the new TXRH investors: Benjamin A. Smith's Laurion Capital Management, Matthew Tewksbury's Stevens Capital Management, and Michael Platt and William Reeves's BlueCrest Capital Mgmt..

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Texas Roadhouse Inc (NASDAQ:TXRH) but similarly valued. We will take a look at Black Hills Corporation (NYSE:BKH), CarGurus, Inc. (NASDAQ:CARG), Hawaiian Electric Industries, Inc. (NYSE:HE), and First Horizon National Corporation (NYSE:FHN). This group of stocks' market caps match TXRH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BKH,18,136002,1 CARG,24,819877,5 HE,12,144367,-1 FHN,16,126038,-3 Average,17.5,306571,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $267 million in TXRH's case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Texas Roadhouse Inc (NASDAQ:TXRH) 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. Unfortunately TXRH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on TXRH were disappointed as the stock returned -15.8% 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.

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