The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Sanchez Energy Corp (NYSE:SN) from the perspective of those successful funds.
Hedge fund interest in Sanchez Energy Corp (NYSE:SN) shares was flat during the third quarter. This is usually a negative indicator.
At the end of this article we will also compare SN to other stocks including Angie’s List Inc (NASDAQ:ANGI), M/I Homes Inc (NYSE:MHO), and Bojangles Inc (NASDAQ:BOJA) to get a better sense of its popularity.
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.
How are hedge funds trading Sanchez Energy Corp (NYSE:SN)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in SN heading into this year, so ownership is down slightly in 2016. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, has the largest position in Sanchez Energy Corp (NYSE:SN), worth close to $20.1 million. The second most bullish fund manager is GRT Capital Partners, led by Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk, holding a $13.7 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish encompass Ken Griffin’s Citadel Investment Group, Charles Clough’s Clough Capital Partners, and David E. Shaw’s D E Shaw. We should note that GRT Capital Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that sold off their entire stakes in the stock during the third quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group sold off the biggest position of all the investors followed by Insider Monkey, worth an estimated $0.4 million in call options (though it retained its long position in the stock). Richard Driehaus’ fund, Driehaus Capital, also dropped its stock, about $0.2 million worth.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Sanchez Energy Corp (NYSE:SN) but similarly valued. We will take a look at Angie’s List Inc (NASDAQ:ANGI), M/I Homes Inc (NYSE:MHO), Bojangles Inc (NASDAQ:BOJA), and Regis Corporation (NYSE:RGS). This group of stocks’ market caps are closest to SN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $64 million in SN’s case. Regis Corporation (NYSE:RGS) is the most popular stock in this table. On the other hand M/I Homes Inc (NYSE:MHO) is the least popular one with only 9 bullish hedge fund positions. Sanchez Energy Corp (NYSE:SN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RGS might be a better candidate to consider taking a long position in.