At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Sally Beauty Holdings, Inc. (NYSE:SBH).
Sally Beauty Holdings, Inc. (NYSE:SBH) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that SBH isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the recent hedge fund action regarding Sally Beauty Holdings, Inc. (NYSE:SBH).
What does smart money think about Sally Beauty Holdings, Inc. (NYSE:SBH)?
At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in SBH a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in Sally Beauty Holdings, Inc. (NYSE:SBH). Arrowstreet Capital has a $20 million position in the stock, comprising 0.1% of its 13F portfolio. On Arrowstreet Capital’s heels is Cliff Asness of AQR Capital Management, with a $17.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass Michael Zimmerman’s Prentice Capital Management, Mario Gabelli’s GAMCO Investors and Renaissance Technologies. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Sally Beauty Holdings, Inc. (NYSE:SBH), around 4.52% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.36 percent of its 13F equity portfolio to SBH.
Due to the fact that Sally Beauty Holdings, Inc. (NYSE:SBH) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds that elected to cut their positions entirely last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dropped the largest stake of the 750 funds followed by Insider Monkey, totaling about $7.5 million in stock, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital was right behind this move, as the fund dumped about $1.2 million worth. These moves are important to note, as total hedge fund interest was cut by 8 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Sally Beauty Holdings, Inc. (NYSE:SBH). These stocks are The Bank of N.T. Butterfield & Son Limited (NYSE:NTB), Supernus Pharmaceuticals Inc (NASDAQ:SUPN), Canadian Solar Inc. (NASDAQ:CSIQ), and Seacoast Banking Corporation of Florida (NASDAQ:SBCF). All of these stocks’ market caps are similar to SBH’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $73 million in SBH’s case. Supernus Pharmaceuticals Inc (NASDAQ:SUPN) is the most popular stock in this table. On the other hand Seacoast Banking Corporation of Florida (NASDAQ:SBCF) is the least popular one with only 8 bullish hedge fund positions. Sally Beauty Holdings, Inc. (NYSE:SBH) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on SBH as the stock returned 54.5% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.