Do Hedge Funds Love SilverBow Resorces, Inc. (SBOW)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like SilverBow Resorces, Inc. (NYSE:SBOW).

Is SilverBow Resorces, Inc. (NYSE:SBOW) the right pick for your portfolio? The smart money is becoming more confident. The number of long hedge fund bets went up by 1 in recent months. Our calculations also showed that SBOW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SBOW was in 6 hedge funds’ portfolios at the end of the third quarter of 2019. There were 5 hedge funds in our database with SBOW holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are many metrics investors can use to appraise publicly traded companies. A pair of the most under-the-radar metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can outperform the broader indices by a solid margin (see the details here).

Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a peek at the new hedge fund action regarding SilverBow Resorces, Inc. (NYSE:SBOW).

What does smart money think about SilverBow Resorces, Inc. (NYSE:SBOW)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SBOW over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SBOW A Good Stock To Buy?

The largest stake in SilverBow Resorces, Inc. (NYSE:SBOW) was held by Strategic Value Partners, which reported holding $43.4 million worth of stock at the end of September. It was followed by DW Partners with a $18 million position. Other investors bullish on the company included Pentwater Capital Management, Zebra Capital Management, and Bailard Inc. In terms of the portfolio weights assigned to each position DW Partners allocated the biggest weight to SilverBow Resorces, Inc. (NYSE:SBOW), around 28.8% of its 13F portfolio. Strategic Value Partners is also relatively very bullish on the stock, earmarking 11.17 percent of its 13F equity portfolio to SBOW.

Now, key money managers were leading the bulls’ herd. Bailard Inc, managed by Thomas Bailard, created the biggest position in SilverBow Resorces, Inc. (NYSE:SBOW). Bailard Inc had $0.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also made a $0.1 million investment in the stock during the quarter.

Let’s check out hedge fund activity in other stocks similar to SilverBow Resorces, Inc. (NYSE:SBOW). We will take a look at Hovnanian Enterprises, Inc. (NYSE:HOV), VOXX International Corp (NASDAQ:VOXX), Airgain, Inc. (NASDAQ:AIRG), and ATIF Holdings Limited (NASDAQ:ATIF). This group of stocks’ market valuations resemble SBOW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HOV 8 8758 5
VOXX 8 28594 -1
AIRG 12 6745 6
ATIF 1 69 0
Average 7.25 11042 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $68 million in SBOW’s case. Airgain, Inc. (NASDAQ:AIRG) is the most popular stock in this table. On the other hand ATIF Holdings Limited (NASDAQ:ATIF) is the least popular one with only 1 bullish hedge fund positions. SilverBow Resorces, Inc. (NYSE:SBOW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SBOW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SBOW investors were disappointed as the stock returned -10% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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