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Did Hedge Funds Make The Right Call On Sinclair Broadcast Group, Inc. (SBGI) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thought Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) has experienced a decrease in hedge fund interest in recent months. Our calculations also showed that SBGI 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Parag Vora - HG Vora Capital

Parag Vora of HG Vora Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding Sinclair Broadcast Group, Inc. (NASDAQ:SBGI).

What have hedge funds been doing with Sinclair Broadcast Group, Inc. (NASDAQ:SBGI)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SBGI over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Contrarius Investment Management, managed by Stephen Mildenhall, holds the biggest position in Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). Contrarius Investment Management has a $29.7 million position in the stock, comprising 3.8% of its 13F portfolio. On Contrarius Investment Management’s heels is Parag Vora of HG Vora Capital Management, with a $28.1 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish contain Derek C. Schrier’s Indaba Capital Management, Randall Smith’s Alden Global Capital and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), around 10.39% of its 13F portfolio. Beach Point Capital Management is also relatively very bullish on the stock, setting aside 8.73 percent of its 13F equity portfolio to SBGI.

Since Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few money managers that slashed their full holdings heading into Q4. It’s worth mentioning that William C. Martin’s Raging Capital Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, comprising close to $47.6 million in stock, and Edward Goodnow’s Goodnow Investment Group was right behind this move, as the fund sold off about $17.8 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 8 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). These stocks are Navient Corp (NASDAQ:NAVI), First Financial Bancorp (NASDAQ:FFBC), The Geo Group, Inc. (NYSE:GEO), and The Chemours Company (NYSE:CC). This group of stocks’ market valuations match SBGI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NAVI 33 152856 -5
FFBC 8 8121 3
GEO 14 83253 -8
CC 32 239323 3
Average 21.75 120888 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $179 million in SBGI’s case. Navient Corp (NASDAQ:NAVI) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 8 bullish hedge fund positions. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately SBGI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SBGI were disappointed as the stock returned 16% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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