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Were Hedge Funds Right About Flocking Into Sinclair Broadcast Group, Inc. (SBGI) ?

“Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Sinclair Broadcast Group, Inc. (NASDAQ:SBGI).

Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) investors should be aware of an increase in hedge fund sentiment recently. Our calculations also showed that sbgi isn’t among the 30 most popular stocks among hedge funds.

To most shareholders, hedge funds are perceived as worthless, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open at the moment, We choose to focus on the crème de la crème of this group, approximately 750 funds. It is estimated that this group of investors oversee bulk of the smart money’s total asset base, and by monitoring their highest performing picks, Insider Monkey has identified a few investment strategies that have historically beaten the market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

BAUPOST GROUP Seth Klarman

We’re going to review the fresh hedge fund action regarding Sinclair Broadcast Group, Inc. (NASDAQ:SBGI).

How are hedge funds trading Sinclair Broadcast Group, Inc. (NASDAQ:SBGI)?

At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in SBGI a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

No of Hedge Funds with SBGI Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Seth Klarman’s Baupost Group has the number one position in Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), worth close to $79 million, corresponding to 0.7% of its total 13F portfolio. On Baupost Group’s heels is Raging Capital Management, managed by William C. Martin, which holds a $59.1 million position; the fund has 8.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Jim Simons’s Renaissance Technologies, Carl Goldsmith and Scott Klein’s Beach Point Capital Management and Edward Goodnow’s Goodnow Investment Group.

As one would reasonably expect, key money managers were leading the bulls’ herd. Meghalaya Partners, managed by Vasan Kesavan, Srikumar Kesavan and Sandeep Ramesh, created the biggest position in Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). Meghalaya Partners had $10.8 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new SBGI investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Minhua Zhang’s Weld Capital Management, and Bradley Louis Radoff’s Fondren Management.

Let’s go over hedge fund activity in other stocks similar to Sinclair Broadcast Group, Inc. (NASDAQ:SBGI). These stocks are BRP Inc. (NASDAQ:DOOO), FTI Consulting, Inc. (NYSE:FCN), Hilton Grand Vacations Inc. (NYSE:HGV), and Axon Enterprise, Inc. (NASDAQ:AAXN). This group of stocks’ market caps are similar to SBGI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DOOO 11 121922 -5
FCN 16 116498 -2
HGV 28 705198 1
AAXN 16 228557 0
Average 17.75 293044 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $293 million. That figure was $378 million in SBGI’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on SBGI as the stock returned 65.9% 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.

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

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