Was The Smart Money Right About Sabre Corporation (SABR)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sabre Corporation (NASDAQ:SABR).

Is Sabre Corporation (NASDAQ:SABR) a cheap investment today? Money managers were becoming more confident. The number of bullish hedge fund positions moved up by 15 in recent months. Sabre Corporation (NASDAQ:SABR) was in 46 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SABR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a peek at the fresh hedge fund action surrounding Sabre Corporation (NASDAQ:SABR).

Do Hedge Funds Think SABR Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 48% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in SABR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SABR A Good Stock To Buy?

Among these funds, PAR Capital Management held the most valuable stake in Sabre Corporation (NASDAQ:SABR), which was worth $186.7 million at the end of the fourth quarter. On the second spot was Fundsmith LLP which amassed $163.7 million worth of shares. Yiheng Capital, Palestra Capital Management, and Contrarius Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Collaborative Holdings Management allocated the biggest weight to Sabre Corporation (NASDAQ:SABR), around 16.05% of its 13F portfolio. King Street Capital is also relatively very bullish on the stock, designating 10.31 percent of its 13F equity portfolio to SABR.

As one would reasonably expect, key hedge funds have been driving this bullishness. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, assembled the biggest position in Sabre Corporation (NASDAQ:SABR). Palestra Capital Management had $106.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $49.6 million position during the quarter. The other funds with new positions in the stock are Sheetal Sharma’s Collaborative Holdings Management, Len Kipp and Xavier Majic’s Maple Rock Capital, and Herbert Frazier’s Hill City Capital.

Let’s also examine hedge fund activity in other stocks similar to Sabre Corporation (NASDAQ:SABR). These stocks are Webster Financial Corporation (NYSE:WBS), Granite Real Estate Investment Trust (NYSE:GRP), Cerence Inc. (NASDAQ:CRNC), Braskem SA (NYSE:BAK), National Fuel Gas Company (NYSE:NFG), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), and Relay Therapeutics, Inc. (NASDAQ:RLAY). This group of stocks’ market caps are similar to SABR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WBS 26 394187 1
GRP 6 45457 0
CRNC 14 215273 2
BAK 8 10599 0
NFG 13 88868 -3
MTSI 24 283694 -4
RLAY 17 706347 -1
Average 15.4 249204 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $1244 million in SABR’s case. Webster Financial Corporation (NYSE:WBS) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Sabre Corporation (NASDAQ:SABR) is more popular among hedge funds. Our overall hedge fund sentiment score for SABR is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on SABR as the stock returned 24.6% since the end of December (through 4/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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