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Did Hedge Funds Make The Right Call On Sabra Health Care REIT Inc (SBRA) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Sabra Health Care REIT Inc (NASDAQ:SBRA) based on that data and determine whether they were really smart about the stock.

Sabra Health Care REIT Inc (NASDAQ:SBRA) investors should pay attention to a decrease in enthusiasm from smart money recently. SBRA was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 27 hedge funds in our database with SBRA holdings at the end of the previous quarter. Our calculations also showed that SBRA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are a multitude of gauges stock traders employ to evaluate stocks. Two of the most underrated gauges are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a superb margin (see the details here).

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to view the recent hedge fund action regarding Sabra Health Care REIT Inc (NASDAQ:SBRA).

How are hedge funds trading Sabra Health Care REIT Inc (NASDAQ:SBRA)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -37% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in SBRA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SBRA A Good Stock To Buy?

The largest stake in Sabra Health Care REIT Inc (NASDAQ:SBRA) was held by Long Pond Capital, which reported holding $89.8 million worth of stock at the end of September. It was followed by D E Shaw with a $11.5 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and Forward Management. In terms of the portfolio weights assigned to each position Long Pond Capital allocated the biggest weight to Sabra Health Care REIT Inc (NASDAQ:SBRA), around 4.6% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, earmarking 1.69 percent of its 13F equity portfolio to SBRA.

Due to the fact that Sabra Health Care REIT Inc (NASDAQ:SBRA) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of fund managers that slashed their entire stakes last quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the largest position of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $16.9 million in stock. Daniel Johnson’s fund, Gillson Capital, also sold off its stock, about $6.1 million worth. These transactions are interesting, as total hedge fund interest fell by 10 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sabra Health Care REIT Inc (NASDAQ:SBRA) but similarly valued. We will take a look at Itron, Inc. (NASDAQ:ITRI), Quaker Chemical Corp (NYSE:KWR), Vivint Smart Home, Inc. (NYSE:VVNT), and ViaSat, Inc. (NASDAQ:VSAT). All of these stocks’ market caps are similar to SBRA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ITRI 19 246826 -2
KWR 8 120286 -1
VVNT 9 6514 -6
VSAT 21 947696 -5
Average 14.25 330331 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $147 million in SBRA’s case. ViaSat, Inc. (NASDAQ:VSAT) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 8 bullish hedge fund positions. Sabra Health Care REIT Inc (NASDAQ:SBRA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on SBRA, though not to the same extent, as the stock returned 31.4% since the end of March and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.