Is Sonic Automotive Inc (SAH) A Good Stock To Buy?

Insider Monkey finished processing more than 700 13F filings made by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th. What do these smart investors think about Sonic Automotive Inc (NYSE:SAH)?

Leena Robinson /

Is Sonic Automotive Inc (NYSE:SAH) going to take off soon? Our calculations show that it seems like hedge funds are taking a pessimistic view at the margin. The number of long hedge fund bets shrunk by 1 recently. At the end of this article we will also compare SAH to other stocks including Ruckus Wireless Inc (NYSE:RKUS), Shenandoah Telecommunications Company (NASDAQ:SHEN), and Celldex Therapeutics, Inc. (NASDAQ:CLDX) to determine whether the decline in hedge fund interest is really a bearish sign.

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In today’s marketplace there are numerous formulas stock market investors use to analyze stocks. A pair of the most underrated formulas are hedge fund and insider trading interest. Hedge fund experts at Insider Monkey have shown that, historically, those who follow the best picks of the elite money managers can outclass the market by a superb margin (see the details here).

With all of this in mind, we’re going to take a glance at the fresh action regarding Sonic Automotive Inc (NYSE:SAH).

Hedge fund activity in Sonic Automotive Inc (NYSE:SAH)

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 -5% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially.

Of the funds tracked by Insider Monkey, Eminence Capital, managed by Ricky Sandler, holds the most valuable position in Sonic Automotive Inc (NYSE:SAH). Eminence Capital has a $58 million position in the stock, comprising 0.9% of its 13F portfolio. On Eminence Capital’s heels is Adam Fox and Samuel Elder of Altalis Capital Partners, with a $8.8 million position; 5.2% of its 13F portfolio is allocated to the company. Some other hedge funds with similar optimism comprise Youlia Miteva’s Proxima Capital Management, Richard Rubin’s Hawkeye Capital and Mario Cibelli’s Marathon Partners.

Since Sonic Automotive Inc (NYSE:SAH) has experienced bearish sentiment at the margin from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedgies who sold off their full holdings in third quarter. Interestingly, magic formula creator Joel Greenblatt’s Gotham Asset Management cut the largest position of the 700 funds watched by Insider Monkey, valued at an estimated $0.5 million in stock, and George Hall of Clinton Group was right behind this move, as the fund said goodbye to about $0.4 million worth.

Let’s check out hedge fund activity in other stocks similar to Sonic Automotive Inc (NYSE:SAH). We will take a look at Ruckus Wireless Inc (NYSE:RKUS), Shenandoah Telecommunications Company (NASDAQ:SHEN), Celldex Therapeutics, Inc. (NASDAQ:CLDX), and Diodes Incorporated (NASDAQ:DIOD). This group of stocks’ market caps resemble SAH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RKUS 19 127505 0
SHEN 16 47462 4
CLDX 14 52238 -5
DIOD 13 79294 -4

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. Ruckus Wireless Inc (NYSE:RKUS) is the most popular stock in this table. On the other hand Diodes Incorporated (NASDAQ:DIOD) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Sonic Automotive Inc (NYSE:SAH) is more popular among hedge funds. Considering that hedge funds are fond of this stock, it may still be a good idea to analyze it in detail and potentially include it in your portfolio.