Hedge Funds Have Never Been Less Bullish On Sabine Royalty Trust (SBR)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Sabine Royalty Trust (NYSE:SBR).

Sabine Royalty Trust (NYSE:SBR) was in 4 hedge funds’ portfolios at the end of March. SBR has seen a decrease in activity from the world’s largest hedge funds recently. There were 6 hedge funds in our database with SBR holdings at the end of the previous quarter. Our calculations also showed that SBR 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.

If you’d ask most market participants, hedge funds are viewed as slow, old financial tools of years past. While there are greater than 8000 funds with their doors open at the moment, Our experts look at the bigwigs of this club, about 850 funds. Most estimates calculate that this group of people have their hands on the lion’s share of the smart money’s total asset base, and by shadowing their matchless investments, Insider Monkey has determined numerous investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s go over the fresh hedge fund action encompassing Sabine Royalty Trust (NYSE:SBR).

Hedge fund activity in Sabine Royalty Trust (NYSE:SBR)

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SBR over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Leonard A. Potter’s Wildcat Capital Management has the largest position in Sabine Royalty Trust (NYSE:SBR), worth close to $9.3 million, comprising 4.2% of its total 13F portfolio. The second largest stake is held by Royce & Associates, led by Chuck Royce, holding a $2.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Russell Lucas’s Lucas Capital Management, Murray Stahl’s Horizon Asset Management and . In terms of the portfolio weights assigned to each position Wildcat Capital Management allocated the biggest weight to Sabine Royalty Trust (NYSE:SBR), around 4.22% of its 13F portfolio. Lucas Capital Management is also relatively very bullish on the stock, earmarking 1.63 percent of its 13F equity portfolio to SBR.

Due to the fact that Sabine Royalty Trust (NYSE:SBR) has experienced bearish sentiment from the smart money, it’s safe to say that there exists a select few funds that elected to cut their entire stakes in the third quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest position of all the hedgies tracked by Insider Monkey, totaling about $0.8 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dropped its stock, about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sabine Royalty Trust (NYSE:SBR) but similarly valued. These stocks are nLIGHT, Inc. (NASDAQ:LASR), Plantronics, Inc. (NYSE:PLT), WideOpenWest, Inc. (NYSE:WOW), and U.S. Lime & Minerals Inc. (NASDAQ:USLM). This group of stocks’ market valuations match SBR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LASR 7 23474 1
PLT 6 14594 -5
WOW 15 19500 -1
USLM 3 26406 -1
Average 7.75 20994 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $13 million in SBR’s case. WideOpenWest, Inc. (NYSE:WOW) is the most popular stock in this table. On the other hand U.S. Lime & Minerals Inc. (NASDAQ:USLM) is the least popular one with only 3 bullish hedge fund positions. Sabine Royalty Trust (NYSE:SBR) 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 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately SBR wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SBR investors were disappointed as the stock returned 2.8% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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