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Is Sally Beauty Holdings, Inc. (SBH) A Good Stock To Buy ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 752 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Sally Beauty Holdings, Inc. (NYSE:SBH).

Sally Beauty Holdings, Inc. (NYSE:SBH) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that SBH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are seen as unimportant, outdated investment tools of the past. While there are more than 8000 funds in operation at the moment, Our experts choose to focus on the leaders of this group, around 750 funds. These investment experts administer bulk of the hedge fund industry’s total asset base, and by watching their highest performing equity investments, Insider Monkey has unsheathed a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the key hedge fund action encompassing Sally Beauty Holdings, Inc. (NYSE:SBH).

Hedge fund activity in Sally Beauty Holdings, Inc. (NYSE:SBH)

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SBH over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Sally Beauty Holdings, Inc. (NYSE:SBH), which was worth $44.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $40.3 million worth of shares. D E Shaw, GAMCO Investors, and Maverick Capital 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 Quantinno Capital allocated the biggest weight to Sally Beauty Holdings, Inc. (NYSE:SBH), around 0.51% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, dishing out 0.15 percent of its 13F equity portfolio to SBH.

As aggregate interest increased, some big names were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in Sally Beauty Holdings, Inc. (NYSE:SBH). Balyasny Asset Management had $6.3 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also initiated a $4.2 million position during the quarter. The following funds were also among the new SBH investors: Paul Tudor Jones’s Tudor Investment Corp, Hoon Kim’s Quantinno Capital, and Donald Sussman’s Paloma Partners.

Let’s go over hedge fund activity in other stocks similar to Sally Beauty Holdings, Inc. (NYSE:SBH). We will take a look at Alexander’s, Inc. (NYSE:ALX), NMI Holdings Inc (NASDAQ:NMIH), ServisFirst Bancshares, Inc. (NASDAQ:SFBS), and Alexander & Baldwin Inc (NYSE:ALEX). All of these stocks’ market caps are closest to SBH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALX 11 98202 7
NMIH 19 224269 0
SFBS 8 11329 -1
ALEX 8 20353 -2
Average 11.5 88538 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $167 million in SBH’s case. NMI Holdings Inc (NASDAQ:NMIH) is the most popular stock in this table. On the other hand ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Sally Beauty Holdings, Inc. (NYSE:SBH) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on SBH as the stock returned 23.8% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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