Sahm Adrangi—founder and Chief Investment Officer of Kerrisdale Capital Management—and his team sent a strong signal earlier this week with their decision to sell a significant number of shares in Fiesta Restaurant Group Inc (FRGI).
Fiesta Restaurant Group is an organization known primarily for its restaurant franchises Taco Cabana and Pollo Tropical. But despite the fact that markets have been generally rallying in recent weeks, FRGI’s stock value has fallen by nearly 20% since the company published its 2017 Q3 financials. As of March 8th, the company’s share price had fallen to $17.78. The company has notably been performing well below the S&P500.
Upon receiving FRGI’s most recently available financial report, Sahm Adrangi and the rest of the executive team at Kerrisdale Capital made a crucial decision to sell 22,500 shares of FRGI stock. As a fairly active management team, this decision was not exceptionally surprising. However, it could send signals to other investors about potential changes occurring at FRGI.
Following the decision to sell, Kerrisdale Capital still holds roughly one-third of their initial stock from FRGI. Adrangi and company now hold 10,688 shares of FRGI as a part of a portfolio that is becoming increasingly diverse over time.
The question that remains on the minds of many financial analysts is whether this movement was because of genuine declines in the value of FRGI stock, a simple instance of Kerrisdale Capital trying to reconstruct their holdings, or if this movement was a combination of numerous different factors.
There are currently nine analysts who are actively covering FRGI’s stock. Of these nine, six (66.67%) recommend holding, one (11.11%) recommends buying, and two (22.22%) recommend selling. Though these opinions obviously represent just a fraction of the overall picture, the solid majority of those advocating holding suggests that FRGI’s stock price may be beginning to stabilize.
Sahm Adrangi is an individual who first rose to financial prominence after successfully shorting a number of corrupted Chinese stocks in the first decade of the 2000s. He has also been widely recognized throughout the industry for his substantial and significant research efforts. Since then, he has gone on to create a hedge fund that focuses largely on the principle of asset diversification and also seeks to carefully balance a collection of short and long positions.
Since initially being launched by in 2009, Kerrisdale Capital has grown from a firm managing less than $1 million to one that is managing hundreds of millions of dollars in less than a decade. Its change in position regarding its FRGI holdings seems to be a normal reaction to changes in the stock’s value, but can also be interpreted as signaling something deeper.
It seems that 2018 will likely be a relatively strong year for Adrangi and the rest of his team. The firm has a portfolio that is well positioned against potential changes in the market and is also diversified in a way that will likely enable positive growth.