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Is Sonic Corporation (SONC) Going to Burn These Hedge Funds? – AFC Enterprises, Inc. (AFCE), Fiesta Restaurant Group Inc (FRGI)

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Is Sonic Corporation (NASDAQ:SONC) the right investment to pursue these days? Prominent investors are in a pessimistic mood. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience

According to most shareholders, hedge funds are assumed to be unimportant, old financial tools of the past. While there are over 8000 funds trading at present, we at Insider Monkey look at the leaders of this group, close to 450 funds. It is widely believed that this group controls most of all hedge funds’ total capital, and by paying attention to their highest performing picks, we have uncovered a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Sonic Corporation

Just as integral, bullish insider trading activity is another way to break down the world of equities. There are a number of reasons for an executive to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the impressive potential of this tactic if you know where to look (learn more here).

Consequently, let’s take a glance at the key action surrounding Sonic Corporation (NASDAQ:SONC).

What does the smart money think about Sonic Corporation (NASDAQ:SONC)?

Heading into 2013, a total of 10 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably.

Of the funds we track, Jim Simons’s Renaissance Technologies had the largest position in Sonic Corporation (NASDAQ:SONC), worth close to $8.3 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Millennium Management, managed by Israel Englander, which held a $3.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds that are bullish include Richard C. Patton’s Courage Capital, Cliff Asness’s AQR Capital Management and Robert B. Gillam’s McKinley Capital Management.

Since Sonic Corporation (NASDAQ:SONC) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that slashed their positions entirely last quarter. Intriguingly, David Costen Haley’s HBK Investments sold off the biggest stake of all the hedgies we monitor, totaling an estimated $1 million in stock.. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also sold off its stock, about $0.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with Sonic Corporation (NASDAQ:SONC)?

Insider buying is at its handiest when the primary stock in question has seen transactions within the past 180 days. Over the last six-month time period, Sonic Corporation (NASDAQ:SONC) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Sonic Corporation (NASDAQ:SONC). These stocks are BJ’s Restaurants, Inc. (NASDAQ:BJRI), AFC Enterprises, Inc. (NASDAQ:AFCE), CEC Entertainment, Inc. (NYSE:CEC), Fiesta Restaurant Group Inc (NASDAQ:FRGI), and Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). This group of stocks are the members of the restaurants industry and their market caps resemble SONC’s market cap.

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