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Hedge Funds Souring On Safe Bulkers, Inc. (SB)

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 first 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 4.5 years and analyze what the smart money thinks of Safe Bulkers, Inc. (NYSE:SB) based on that data.

Safe Bulkers, Inc. (NYSE:SB) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that SB 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the fresh hedge fund action encompassing Safe Bulkers, Inc. (NYSE:SB).

Hedge fund activity in Safe Bulkers, Inc. (NYSE:SB)

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SB over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Safe Bulkers, Inc. (NYSE:SB), with a stake worth $5.5 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $0.4 million. Arrowstreet Capital, Two Sigma Advisors, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Safe Bulkers, Inc. (NYSE:SB), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.001 percent of its 13F equity portfolio to SB.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified SB as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Safe Bulkers, Inc. (NYSE:SB) but similarly valued. These stocks are Lineage Cell Therapeutics, Inc. (NYSE:LCTX), Oil States International, Inc. (NYSE:OIS), Hebron Technology Co., Ltd. (NASDAQ:HEBT), and Mistras Group, Inc. (NYSE:MG). This group of stocks’ market values are similar to SB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LCTX 6 28804 1
OIS 12 4777 -1
HEBT 1 1124 0
MG 13 11507 -2
Average 8 11553 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $7 million in SB’s case. Mistras Group, Inc. (NYSE:MG) is the most popular stock in this table. On the other hand Hebron Technology Co., Ltd. (NASDAQ:HEBT) is the least popular one with only 1 bullish hedge fund positions. Safe Bulkers, Inc. (NYSE:SB) 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 13.9% in 2020 through June 10th and surpassed the market by 14.2 percentage points. Unfortunately SB wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SB investors were disappointed as the stock returned 10.1% 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.