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Hedge Funds Have Never Been This Bullish On Sabre Corporation (SABR)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Sabre Corporation (NASDAQ:SABR) and determine whether hedge funds skillfully traded this stock.

Is Sabre Corporation (NASDAQ:SABR) the right investment to pursue these days? The smart money was taking an optimistic view. The number of long hedge fund bets improved by 9 in recent months. Sabre Corporation (NASDAQ:SABR) was in 39 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SABR 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). There were 30 hedge funds in our database with SABR positions at the end of the first quarter.

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.

Jeffrey Tannenbaum of Fir Tree

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. 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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind we’re going to take a gander at the key hedge fund action regarding Sabre Corporation (NASDAQ:SABR).

What does smart money think about Sabre Corporation (NASDAQ:SABR)?

At the end of June, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the first quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in SABR a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Sabre Corporation (NASDAQ:SABR) was held by Yiheng Capital, which reported holding $76 million worth of stock at the end of September. It was followed by SRS Investment Management with a $60.7 million position. Other investors bullish on the company included D E Shaw, PAR Capital Management, and Sirios Capital Management. In terms of the portfolio weights assigned to each position White Square Capital allocated the biggest weight to Sabre Corporation (NASDAQ:SABR), around 3.95% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, dishing out 3.79 percent of its 13F equity portfolio to SABR.

Consequently, key hedge funds have jumped into Sabre Corporation (NASDAQ:SABR) headfirst. Yiheng Capital, managed by Jonathan Guo, established the biggest position in Sabre Corporation (NASDAQ:SABR). Yiheng Capital had $76 million invested in the company at the end of the quarter. Paul Reeder and Edward Shapiro’s PAR Capital Management also initiated a $37.5 million position during the quarter. The following funds were also among the new SABR investors: John Brennan’s Sirios Capital Management, Jeffrey Tannenbaum’s Fir Tree, and Stephen Mildenhall’s Contrarius Investment Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Sabre Corporation (NASDAQ:SABR) but similarly valued. We will take a look at NCR Corporation (NYSE:NCR), Independent Bank Corp (NASDAQ:INDB), Viela Bio, Inc. (NASDAQ:VIE), Pacira Biosciences Inc (NASDAQ:PCRX), Vishay Intertechnology, Inc. (NYSE:VSH), Sensient Technologies Corporation (NYSE:SXT), and LGI Homes Inc (NASDAQ:LGIH). This group of stocks’ market valuations are closest to SABR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NCR 32 195774 0
INDB 7 10886 3
VIE 8 241277 2
PCRX 29 553399 3
VSH 28 333650 5
SXT 23 170066 0
LGIH 22 108240 8
Average 21.3 230470 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $412 million in SABR’s case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Sabre Corporation (NASDAQ:SABR) is more popular among hedge funds. Our overall hedge fund sentiment score for SABR is 90. 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 gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately SABR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SABR were disappointed as the stock returned -13.3% since the end of 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.