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Sabine Royalty Trust (SBR): Are Hedge Funds Right About This Stock?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Sabine Royalty Trust (NYSE:SBR).

Sabine Royalty Trust (NYSE:SBR) has seen an increase in hedge fund sentiment recently. Our calculations also showed that SBR isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 today’s marketplace there are many tools investors use to evaluate stocks. A pair of the best tools are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outpace the S&P 500 by a superb margin (see the details here).

SBR_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the fresh hedge fund action regarding Sabine Royalty Trust (NYSE:SBR).

How have hedgies been trading Sabine Royalty Trust (NYSE:SBR)?

Heading into the third quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from one quarter earlier. By comparison, 8 hedge funds held shares or bullish call options in SBR a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Chuck Royce

More specifically, Wildcat Capital Management was the largest shareholder of Sabine Royalty Trust (NYSE:SBR), with a stake worth $16.2 million reported as of the end of March. Trailing Wildcat Capital Management was Royce & Associates, which amassed a stake valued at $3.3 million. Arrowstreet Capital, Lucas Capital Management, and Horizon Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, key money managers have been driving this bullishness. Renaissance Technologies, assembled the biggest position in Sabine Royalty Trust (NYSE:SBR). Renaissance Technologies had $0.5 million invested in the company at the end of the quarter.

Let’s also examine hedge fund activity in other stocks similar to Sabine Royalty Trust (NYSE:SBR). These stocks are Banc of California, Inc. (NYSE:BANC), Partner Communications Company Ltd (NASDAQ:PTNR), Camden National Corporation (NASDAQ:CAC), and PlayAGS, Inc. (NYSE:AGS). All of these stocks’ market caps are similar to SBR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BANC 14 87482 -1
PTNR 2 11368 0
CAC 10 71124 4
AGS 12 81504 -10
Average 9.5 62870 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $26 million in SBR’s case. Banc of California, Inc. (NYSE:BANC) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 2 bullish hedge fund positions. Sabine Royalty Trust (NYSE:SBR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SBR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SBR investors were disappointed as the stock returned -8.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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