How Sabine Royalty Trust (SBR) Compares to Its Peers

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Sabine Royalty Trust (NYSE:SBR).

Sabine Royalty Trust (NYSE:SBR) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds’ portfolios at the end of the third quarter of 2016, same as at the end of the second quarter. At the end of this article we will also compare SBR to other stocks including MDC Partners Inc. (USA) (NASDAQ:MDCA), Lumber Liquidators Holdings Inc (NYSE:LL), and PennantPark Investment Corp. (NASDAQ:PNNT) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about Sabine Royalty Trust (NYSE:SBR)?

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SBR over the last 5 quarters, which has trended up slightly during that time. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Lucas Capital Management, led by Russell Lucas, holds the number one position in Sabine Royalty Trust (NYSE:SBR). Lucas Capital Management has a $7.4 million position in the stock, comprising 5.7% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, led by Chuck Royce, holding a $2.2 million position. Other professional money managers that are bullish contain Murray Stahl’s Horizon Asset Management, Renaissance Technologies, one of the biggest hedge funds in the world, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

We view hedge fund activity in the stock as unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Hawkins Capital).

Let’s now take a look at hedge fund activity in other stocks similar to Sabine Royalty Trust (NYSE:SBR). We will take a look at MDC Partners Inc. (USA) (NASDAQ:MDCA), Lumber Liquidators Holdings Inc (NYSE:LL), PennantPark Investment Corp. (NASDAQ:PNNT), and First Potomac Realty Trust (NYSE:FPO). This group of stocks’ market valuations are closest to SBR’s market valuation.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $13 million in SBR’s case. Lumber Liquidators Holdings Inc (NYSE:LL) is the most popular stock in this table. On the other hand PennantPark Investment Corp. (NASDAQ:PNNT) is the least popular one with only 5 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. In this regard LL might be a better candidate to consider taking a long position in.

Disclosure: None