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.
Is Chuy's Holdings Inc (NASDAQ:CHUY) the right investment to pursue these days? Investors who are in the know are buying. The number of bullish hedge fund positions improved by 2 recently. Our calculations also showed that CHUY isn't among the 30 most popular stocks among hedge funds (see the video below). CHUY was in 12 hedge funds' portfolios at the end of the second quarter of 2019. There were 10 hedge funds in our database with CHUY holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We're going to view the latest hedge fund action surrounding Chuy's Holdings Inc (NASDAQ:CHUY).
What have hedge funds been doing with Chuy's Holdings Inc (NASDAQ:CHUY)?
At Q2's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHUY over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Chuy's Holdings Inc (NASDAQ:CHUY) was held by Renaissance Technologies, which reported holding $5.3 million worth of stock at the end of March. It was followed by D E Shaw with a $5 million position. Other investors bullish on the company included Marshall Wace LLP, Coatue Management, and Citadel Investment Group.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Coatue Management, managed by Philippe Laffont, initiated the most outsized position in Chuy's Holdings Inc (NASDAQ:CHUY). Coatue Management had $2.3 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $1 million investment in the stock during the quarter. The following funds were also among the new CHUY investors: Minhua Zhang's Weld Capital Management, Benjamin A. Smith's Laurion Capital Management, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors.
Let's go over hedge fund activity in other stocks similar to Chuy's Holdings Inc (NASDAQ:CHUY). These stocks are AC Immune SA (NASDAQ:ACIU), Allied Motion Technologies, Inc. (NASDAQ:AMOT), Acorda Therapeutics Inc (NASDAQ:ACOR), and Calyxt, Inc. (NASDAQ:CLXT). This group of stocks' market caps resemble CHUY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACIU,7,61527,-2 AMOT,12,27502,0 ACOR,16,108015,-6 CLXT,3,5882,0 Average,9.5,50732,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $19 million in CHUY's case. Acorda Therapeutics Inc (NASDAQ:ACOR) is the most popular stock in this table. On the other hand Calyxt, Inc. (NASDAQ:CLXT) is the least popular one with only 3 bullish hedge fund positions. Chuy's Holdings Inc (NASDAQ:CHUY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CHUY as the stock returned 8% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.