After the markets closed on Monday Sonic Corporation (NASDAQ:SONC) reported its fiscal third-quarter financial results. The fast food company’s results for the fiscal third quarter were in-line with the expectations. The company reported Earnings Per Share (EPS) of $0.36 with a revenue of $164.7 million, in-line with Thomson Reuters consensus estimates of $0.36 in EPS and $164.17 million in revenues. In this way, Sonic Corporation (NASDAQ:SONC) posted a 20% increase in EPS and a $12 million gain in revenue. The major talking point was a conservative guidance given by the company for the fiscal year 2015. Sonic Corporation (NASDAQ:SONC) expects the EPS to grow in the range between 27% – 29% from its FY2014 EPS of $0.84, but it is below the consensus estimate of $1.09. This forecast from the company has impacted the stock, as it declined by 10% on Tuesday. How do hedge funds feel about Sonic Corporation and is it the right time to buy this stock?
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It is very important to track the hedge fund and insider activity on the stock as it can give a different perspective. Hedge funds generally do a detailed research on their stock picks and tracking these hedge funds could help us in gaining an advantage. On the other hand, insider activity on the stock is as important as the hedge fund activity, as the insiders have the luxury of more information about the stock when compared to hedge fund managers and analysts.
The number of hedge funds’ positions in Sonic Corporation (NASDAQ:SONC) dropped to 21 at the end of the first quarter from 23 in the previous quarter. This shows that hedge funds are not too positive on this stock. Even though the number of hedge fund position in the stock has reduced, the aggregate capital invested in the stock by hedge funds went up by 14% to $130.9 million by the end of first quarter. This increase in aggregate capital investment cannot be considered as a bullish sentiment from hedgies’, as the stock has gained around 20% during the first quarter.
Let’s take a look at the insider activity on Sonic Corporation (NASDAQ:SONC). There have been no insider purchase of the stock in the last few months. But there were several insider sales. Among them, the CEO of Sonic Corporation (NASDAQ:SONC), Clifford Hudson sold around 190,000 shares at around $31.50 per share, while Lead Independent Director of Sonic Corporation (NASDAQ:SONC), Frank Richardson unloaded some 106,000 shares during the first quarter. There were few other insider sales of smaller magnitude during the last couple of months.
In addition, we’re going to take a look at the latest hedge fund activity on Sonic Corporation (NASDAQ:SONC).
Hedge fund activity in Sonic Corporation (NASDAQ:SONC)
Heading into the second quarter, there was a decline of 9% in the number of hedge fund positions in Sonic Corporation from the previous quarter. Declining hedge fund interest on the stock indicate that several hedge fund managers have cut their position in the stock and few other opted to sell their entire stake in the company.
According to Insider Monkey’s database, Richard Chilton’s Chilton Investment Company holds the largest position in Sonic Corporation (NASDAQ:SONC), with 1.79 million shares worth close to $56.8 million at the end of first quarter, corresponding to 2% of its total 13F portfolio. It is followed by Israel Englander‘s Millennium Management with 491,300 shares. Other hedge fund managers that hold long positions include Ken Griffin‘s Citadel Investment Group, Robert B. Gillam’s McKinley Capital Management and Eric Bannasch’s Cadian Capital.
Among the hedgies’ who sold out their stakes in Sonic Corporation (NASDAQ:SONC,) Jim Simons‘ Renaissance Technologies leads the way by selling around 480,000 shares followed by Steve Cohen’s fund, Point72 Asset Management, who dumped 265,000 shares during the first three months of the year.
To sum up, hedge funds showed a declining interest in Sonic Corporation (NASDAQ:SONC) and a significant amount of shares was sold by some key insiders since the beginning of the year. In addition, the 10% decline of the weaker than expected guidance, show that Sonic Corporation (NASDAQ:SONC) is not a good buy at the moment.
Disclosure: None
