Is Sinclair Broadcast Group Inc. (SBGI) A Good Stock To Buy?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Sinclair Broadcast Group Inc. (NASDAQ:SBGI).

Is Sinclair Broadcast Group Inc. (NASDAQ:SBGI) a buy right now? Prominent investors are getting less optimistic. The number of long hedge fund bets shrank by 1 in recent months. SBGI was in 32 hedge funds’ portfolios at the end of the third quarter of 2016. There were 33 hedge funds in our database with SBGI positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Nabors Industries Ltd. (NYSE:NBR), Avista Corp (NYSE:AVA), and China Biologic Products Inc (NASDAQ:CBPO) to gather more data points.

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.

With all of this in mind, let’s analyze the new action surrounding Sinclair Broadcast Group Inc. (NASDAQ:SBGI).

How are hedge funds trading Sinclair Broadcast Group Inc. (NASDAQ:SBGI)?

At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 3% dip from the second quarter of 2016. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Thomas E. Claugus’s GMT Capital has the biggest position in Sinclair Broadcast Group Inc. (NASDAQ:SBGI), worth close to $120.5 million, accounting for 2.5% of its total 13F portfolio. The second most bullish fund manager is Gratia Capital, led by Steve Pei, holding a $32.6 million call position; 10.7% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism contain Richard Barrera’s Roystone Capital Partners, Carl Goldsmith and Scott Klein’s Beach Point Capital Management and Edward Goodnow’s Goodnow Investment Group.

Judging by the fact that Sinclair Broadcast Group Inc. (NASDAQ:SBGI) has experienced bearish sentiment from hedge fund managers, logic holds that there were a few money managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, Francis Cueto’s Asturias Capital dropped the largest stake of the 700 funds watched by Insider Monkey, totaling close to $21.2 million in call options. Buckley Ratchford’s fund, Wingspan Investment Management, also sold off its call options, about $7.9 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 fund by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Sinclair Broadcast Group Inc. (NASDAQ:SBGI). These stocks are Nabors Industries Ltd. (NYSE:NBR), Avista Corp (NYSE:AVA), China Biologic Products Inc (NASDAQ:CBPO), and Molina Healthcare, Inc. (NYSE:MOH). All of these stocks’ market caps match SBGI’s market cap.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $301 million. That figure was $347 million in SBGI’s case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand Avista Corp (NYSE:AVA) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Sinclair Broadcast Group Inc. (NASDAQ:SBGI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None