Should You Buy Sally Beauty Holdings, Inc. (SBH)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article we look at what those investors think of Sally Beauty Holdings, Inc. (NYSE:SBH).

Sally Beauty Holdings, Inc. (NYSE:SBH) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of the third quarter of 2018. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as SPX FLOW, Inc. (NASDAQ:FLOW), The Medicines Company (NASDAQ:MDCO), and United Community Banks Inc (NASDAQ:UCBI) to gather more data points.

To the average investor there are numerous tools stock traders employ to value publicly traded companies. A pair of the most innovative tools are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outclass the market by a very impressive margin (see the details here).


Let’s take a look at the latest hedge fund action encompassing Sally Beauty Holdings, Inc. (NYSE:SBH).

What does the smart money think about Sally Beauty Holdings, Inc. (NYSE:SBH)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, representing no change from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in SBH at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SBH Positions

Among these funds, Arrowstreet Capital held the most valuable stake in Sally Beauty Holdings, Inc. (NYSE:SBH), which was worth $29.6 million at the end of the third quarter. On the second spot was D E Shaw which amassed $28.6 million worth of shares. Moreover, Holocene Advisors, Maverick Capital, and GAMCO Investors were also bullish on Sally Beauty Holdings, Inc. (NYSE:SBH), allocating a large percentage of their portfolios to this stock.

Since Sally Beauty Holdings, Inc. (NYSE:SBH) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedge funds who were dropping their positions entirely in the third quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest position of the 700 funds tracked by Insider Monkey, comprising close to $0.9 million in stock. Alec Litowitz and Ross Laser’s fund, Magnetar Capital, also dropped its stock, about $0.4 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Sally Beauty Holdings, Inc. (NYSE:SBH) but similarly valued. We will take a look at SPX FLOW, Inc. (NASDAQ:FLOW), The Medicines Company (NASDAQ:MDCO), United Community Banks Inc (NASDAQ:UCBI), and Nabors Industries Ltd. (NYSE:NBR). This group of stocks’ market caps are closest to SBH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FLOW 13 191135 -5
MDCO 26 697023 -2
UCBI 14 75078 0
NBR 39 440817 2
Average 23 351013 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $351 million. That figure was $153 million in SBH’s case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand SPX FLOW, Inc. (NASDAQ:FLOW) is the least popular one with only 13 bullish hedge fund positions. Sally Beauty Holdings, Inc. (NYSE:SBH) 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. In this regard NBR might be a better candidate to consider a long position.

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