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What do the top Hedge Fund and Mutual Fund Gurus like in the Restaurant Industry? This article, the twenty-sixth in a series, identifies through research of the latest available institutional 13-F filings the Gurus that are most invested in the Restaurant Industry, and the specific stocks within that Industry that they prefer to hold in their portfolios.
Please note that this article will be among the last in this series, as the latest March 2011 quarter 13-F Institutional filings are now beginning to come out. About 40% were out as of this weekend, and most should be filed by the end of this week. As such, once 13-F filings are complete for all Guru funds, I intend to publish the ‘Top New and Added Picks’ of Guru Funds by industry / sector detailing -- not the top holdings this time, but more importantly-- what new positions they took and what existing positions they added to in the latest March 2011 quarter. Please check my article page for previous articles in this series.
A Guru is defined as someone who is regarded as having great knowledge, wisdom, and authority in a certain area. When it comes to hedge funds, there are a number of ways to anoint leading managers as Gurus including long-term performance, low portfolio volatility and an elite reputation in the investment community.
Many of us are familiar with leading investors and hedge fund managers such as Warren Buffett, George Soros, Carl Icahn and Julian Robertson, but the hedge fund community alone includes over 9,000 funds; add in mutual funds, ETFs, and other investment entities and the number is likely to be at least two to three times that number. While there is no official list of Gurus, less than one percent or between 100 to 200 fund managers are commonly believed by the larger investment community to have earned the distinction of being called Gurus.
The study of the investing habits of Gurus can be informative as these are very savvy, well-respected investors with high personal net worth deploying large sums of capital from their funds on a regular basis. They have a long-term track record of success, and while one can easily just ride their coattails, the savvy investor may want to use these lists as a starting point to conduct their own due diligence.
The total capitalization of the U.S. Equity markets is somewhere in the $15 trillion range, and the total market capitalization of Restaurant companies is $190 billion or 1.3% of the overall market. The Table lists the top six investment Gurus whose funds have invested at least 3.9% or three times the average in the Restaurant Sector.
The following is a list of the top Restaurant Company picks of Guru Funds over-concentrated in that Sector:
  • International fast-food restaurant companies such as McDonald's Corp. (NYSE:MCD), a franchisee and operator of 32,737 McDonald’s fast-food restaurants worldwide; Yum! Brands Inc. (NYSE:YUM), a franchisee and operator of 37,835 fast-food restaurants including Pizza Hut, Taco Bell and KFC in over 110 countries; Chipotle Mexican Grill (NYSE:CMG), an operator of 1,084 fast casual Mexican food restaurants in the U.S., Canada and U.K.
  • International bakery-café restaurants such as Starbucks Corp. (NASDAQ:SBUX), an operator of 16,858 coffee shops worldwide including over 11,000 in the U.S.; and Panera Bread CL A (NASDAQ:PNRA), a franchisee and operator of 1,453 bakery-cafes in 40 states, D.C. and Canada.
  • International steakhouse restaurant Companies such as Mortons Restaurant Group (NYSE:MRT), an operator of 72 steakhouse and Italian restaurants in 27 states, Puerto Rico and five other countries; and Ruth’s Hospitality Group (NASDAQ:RUTH), a franchisee and operator of 154 upscale steakhouse restaurants in the U.S. and other countries.
  • International Pizza Company Dominos Pizza Inc. (NYSE:DPZ), a franchisee and operator of 9,351 Pizza delivery and carry-out restaurants in the U.S. and over 65 other countries.
  • North American based restaurant companies such as Dineequity Inc. (NYSE:DIN), a franchisee, licensee and operates of 3,514 IHOP and Applebee’s Restaurants; Red Robin Gourmet Burger (NASDAQ:RRGB), an franchisee and operator of 450 casual restaurants in 40 states and 2 Canadian provinces; O’Charleys Inc. (NASDAQ:CHUX), an franchisee and operator of 347 full-service, casual dining restaurants in 17 east, southeast, mid-west and northeast states; Cheesecake Factory Inc. (NASDAQ:CAKE), an operator of 150 Cheesecake Factory restaurants, 13 Grand Lux Cafes, and One Rocksugar Pan Asian Kitchen in 35 states; and PF Changs China Bistro (NASDAQ:PFCB), an operator of 369 PF Chang’s Bistros and Pei Wei restaurants.
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Equity Portfolio invested in Equities of Companies in the Restaurant Industry
Major Restaurant company positions in Portfolio
MSD Capital (Michael Dell)
Hedge Fund
$ 900 million
19.3%
DIN, DPZ
Clinton Group Inc. (George Hall)
Hedge Fund - Multi-strategy
$ 3.5 billion including $131 million in equities
18.2%
RRGB, MRT, CHUX, RUTH
Lone Pine Capital LLC (Steve Mandel)
Hedge Fund - Long/Short
$ 12.5 billion
5.0%
YUM
Hillman Capital Management, Inc. (Mark Hillman)
Asset Manager including Mutual Funds
$450 million
4.8%
SBUX
Hussman Econometrics Advisors, Inc. (John Hussman)
Mutual Fund
$ 6.3 billion
4.7%
PNRA, CAKE, CMG, MCD, SBUX, PFCB
Hedge Fund Clinton Group, founded by George Hall in 1991, is focused on mortgage-backed securities, convertible bonds, global fixed income and a multi-strategy fund.
Steve Mandel, who started Lone Pine Capital in 1997, is also a former Tiger Cub. He was a senior managing director and consumer analyst at Julian Robertson's Tiger Management Corporation from 1990-97 prior to starting Lone Pine Capital.
Bethesda, Maryland-based Hillman Capital Management, headed by Guru Mark Hillman is a value manager, and invests in out-of-favor companies that have quantitative competitive advantages, and whose value is not yet factored into the market.
Dr. Hussman founder of Hussman Econometrics Advisors, manages the Hussman Funds which are diversified, no-load mutual funds for investors seeking long-term investment returns, with added emphasis on capital protection in unfavorable market conditions. Prior to managing the Hussman Funds, he was a former professor at the University of Michigan. He is widely known for his criticism of the U.S. Treasury and the Federal Reserve and for predicting the 2008-2009 U.S. Recession, and as of late 2009, he is calling for another financial crisis due to bad policy choices made by the U.S. government.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my opinions and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Top Restaurant Company Picks by Fund Gurus Concentrated in the Sector