Hedge Funds Are Selling Sinclair Broadcast Group, Inc. (SBGI)

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 second 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 5 years and analyze what the smart money thinks of Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) based on that data and determine whether they were really smart about the stock.

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistics is 47. Our calculations also showed that SBGI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. 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, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a peek at the new hedge fund action encompassing Sinclair Broadcast Group, Inc. (NASDAQ:SBGI).

What does smart money think about Sinclair Broadcast Group, Inc. (NASDAQ:SBGI)?

Heading into the third quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the first quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in SBGI a year ago. So, let’s review 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, HG Vora Capital Management, managed by Parag Vora, holds the number one position in Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). HG Vora Capital Management has a $101.5 million position in the stock, comprising 9.1% of its 13F portfolio. The second most bullish fund manager is Contrarius Investment Management, managed by Stephen Mildenhall, which holds a $55.7 million position; 5.3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions include Randall Smith’s Alden Global Capital, Mario Gabelli’s GAMCO Investors and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Alden Global Capital allocated the biggest weight to Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), around 9.55% of its 13F portfolio. HG Vora Capital Management is also relatively very bullish on the stock, designating 9.13 percent of its 13F equity portfolio to SBGI.

Seeing as Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) has witnessed falling interest from the aggregate hedge fund industry, we can see that there were a few funds who were dropping their full holdings in the second quarter. At the top of the heap, Derek C. Schrier’s Indaba Capital Management cut the largest stake of the 750 funds watched by Insider Monkey, valued at about $19.3 million in stock. Renaissance Technologies, also said goodbye to its stock, about $12.8 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). We will take a look at Zuora, Inc. (NYSE:ZUO), LTC Properties Inc (NYSE:LTC), Turquoise Hill Resources Ltd (NYSE:TRQ), Super Micro Computer, Inc. (NASDAQ:SMCI), Boise Cascade Co (NYSE:BCC), Rattler Midstream LP (NASDAQ:RTLR), and National Research Corporation (NASDAQ:NRC). This group of stocks’ market caps resemble SBGI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZUO 21 104127 -2
LTC 15 18655 4
TRQ 13 268820 -1
SMCI 22 422478 -2
BCC 13 42926 -5
RTLR 7 94193 -2
NRC 7 49108 -1
Average 14 142901 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $258 million in SBGI’s case. Super Micro Computer, Inc. (NASDAQ:SMCI) is the most popular stock in this table. On the other hand Rattler Midstream LP (NASDAQ:RTLR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is more popular among hedge funds. Our overall hedge fund sentiment score for SBGI is 69.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 returned 21.3% in 2020 through September 25th but still managed to beat the market by 17.7 percentage points. Hedge funds were also right about betting on SBGI as the stock returned 8.5% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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