Is SBGI A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is SBGI a good stock to buy now? Prominent investors were getting less bullish. The number of bullish hedge fund bets shrunk by 4 recently. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) was in 20 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 47. Our calculations also showed that SBGI isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David Brown Hawk Ridge Partners

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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a look at the new hedge fund action surrounding Sinclair Broadcast Group, Inc. (NASDAQ:SBGI).

Do Hedge Funds Think SBGI Is A Good Stock To Buy Now?

At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SBGI over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SBGI A Good Stock To Buy?

More specifically, HG Vora Capital Management was the largest shareholder of Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), with a stake worth $95.2 million reported as of the end of September. Trailing HG Vora Capital Management was Contrarius Investment Management, which amassed a stake valued at $59.4 million. GAMCO Investors, Alden Global Capital, and D E Shaw 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 Alden Global Capital allocated the biggest weight to Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), around 7.71% of its 13F portfolio. HG Vora Capital Management is also relatively very bullish on the stock, earmarking 7.18 percent of its 13F equity portfolio to SBGI.

Seeing as Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that decided to sell off their entire stakes in the third quarter. At the top of the heap, Steven Tananbaum’s GoldenTree Asset Management cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $9.3 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund cut about $1.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 4 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). We will take a look at RLJ Lodging Trust (NYSE:RLJ), Azure Power Global Limited (NYSE:AZRE), Industrial Logistics Properties Trust (NASDAQ:ILPT), Michaels Companies Inc (NASDAQ:MIK), Southwestern Energy Company (NYSE:SWN), Global Net Lease, Inc. (NYSE:GNL), and Perficient, Inc. (NASDAQ:PRFT). This group of stocks’ market valuations are similar to SBGI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RLJ 15 79610 -3
AZRE 4 14828 1
ILPT 9 16849 0
MIK 38 285583 17
SWN 19 217863 4
GNL 7 10377 0
PRFT 17 74006 -4
Average 15.6 99874 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $257 million in SBGI’s case. Michaels Companies Inc (NASDAQ:MIK) is the most popular stock in this table. On the other hand Azure Power Global Limited (NYSE:AZRE) is the least popular one with only 4 bullish hedge fund positions. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBGI is 37.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on SBGI as the stock returned 47.6% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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