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Hedge Funds Have Never Been This Bullish On SBA Communications Corporation (SBAC)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards SBA Communications Corporation (NASDAQ:SBAC) at the end of the second quarter and determine whether the smart money was really smart about this stock.

SBA Communications Corporation (NASDAQ:SBAC) was in 57 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 50. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. SBAC investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 46 hedge funds in our database with SBAC positions at the end of the first quarter. Our calculations also showed that SBAC 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s view the latest hedge fund action surrounding SBA Communications Corporation (NASDAQ:SBAC).

What does smart money think about SBA Communications Corporation (NASDAQ:SBAC)?

At the end of the second quarter, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in SBAC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in SBA Communications Corporation (NASDAQ:SBAC) was held by Akre Capital Management, which reported holding $734.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $223.2 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and Holocene Advisors. In terms of the portfolio weights assigned to each position Portsea Asset Management allocated the biggest weight to SBA Communications Corporation (NASDAQ:SBAC), around 36.83% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, designating 9.09 percent of its 13F equity portfolio to SBAC.

Consequently, key hedge funds have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, established the largest position in SBA Communications Corporation (NASDAQ:SBAC). Holocene Advisors had $113.1 million invested in the company at the end of the quarter. Jaime Sterne’s Skye Global Management also initiated a $56.6 million position during the quarter. The other funds with brand new SBAC positions are Wayne Cooperman’s Cobalt Capital Management, Kevin Cottrell and Chris LaSusa’s KCL Capital, and Richard Walters II’s Stony Point Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SBA Communications Corporation (NASDAQ:SBAC) but similarly valued. We will take a look at Metlife Inc (NYSE:MET), Xcel Energy Inc (NASDAQ:XEL), HCA Healthcare Inc (NYSE:HCA), NXP Semiconductors NV (NASDAQ:NXPI), DocuSign, Inc. (NASDAQ:DOCU), Splunk Inc (NASDAQ:SPLK), and Orange SA (NYSE:ORAN). All of these stocks’ market caps are similar to SBAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MET 31 970822 -3
XEL 23 273421 -1
HCA 71 2240096 -16
NXPI 67 2214977 15
DOCU 57 2585727 10
SPLK 49 874330 12
ORAN 3 6480 -2
Average 43 1309408 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $1309 million. That figure was $2166 million in SBAC’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. SBA Communications Corporation (NASDAQ:SBAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBAC is 79.7. 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. 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 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately SBAC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SBAC were disappointed as the stock returned 1.4% 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.