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Sonic Automotive Inc (SAH): Insiders Aren’t Crazy About It

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Sonic Automotive Inc (NYSE:SAH) shareholders have witnessed an increase in hedge fund sentiment lately.

According to most shareholders, hedge funds are seen as slow, outdated financial tools of the past. While there are more than 8000 funds with their doors open today, we hone in on the bigwigs of this club, about 450 funds. Most estimates calculate that this group controls the majority of the hedge fund industry’s total capital, and by keeping an eye on their best stock picks, we have discovered a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as integral, optimistic insider trading sentiment is a second way to parse down the financial markets. Obviously, there are a number of motivations for a bullish insider to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this strategy if “monkeys” know where to look (learn more here).

Consequently, we’re going to take a look at the latest action regarding Sonic Automotive Inc (NYSE:SAH).

How have hedgies been trading Sonic Automotive Inc (NYSE:SAH)?

At Q1’s end, a total of 12 of the hedge funds we track were long in this stock, a change of 9% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes substantially.

Sonic Automotive Inc (NYSE:SAH)Of the funds we track, Hawkeye Capital, managed by Richard Rubin, holds the most valuable position in Sonic Automotive Inc (NYSE:SAH). Hawkeye Capital has a $27 million position in the stock, comprising 10% of its 13F portfolio. Sitting at the No. 2 spot is Ricky Sandler of Eminence Capital, with a $18.9 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Some other peers that are bullish include Dennis Leibowitz’s Act II Capital, Jim Simons’s Renaissance Technologies and Israel Englander’s Millennium Management.

As aggregate interest increased, some big names were breaking ground themselves. Eminence Capital, managed by Ricky Sandler, initiated the biggest position in Sonic Automotive Inc (NYSE:SAH). Eminence Capital had 18.9 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $1.6 million position during the quarter. The following funds were also among the new SAH investors: Matthew Tewksbury’s Stevens Capital Management and Steven Cohen’s SAC Capital Advisors.

What have insiders been doing with Sonic Automotive Inc (NYSE:SAH)?

Insider purchases made by high-level executives is particularly usable when the company in focus has experienced transactions within the past half-year. Over the last half-year time frame, Sonic Automotive Inc (NYSE:SAH) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Sonic Automotive Inc (NYSE:SAH). These stocks are Penske Automotive Group, Inc. (NYSE:PAG), KAR Auction Services Inc (NYSE:KAR), Asbury Automotive Group, Inc. (NYSE:ABG), Lithia Motors Inc (NYSE:LAD), and Group 1 Automotive, Inc. (NYSE:GPI). All of these stocks are in the auto dealerships industry and their market caps are closest to SAH’s market cap.

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