Were Hedge Funds Right About SBA Communications Corporation (SBAC)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of SBA Communications Corporation (NASDAQ:SBAC).

Is SBA Communications Corporation (NASDAQ:SBAC) undervalued? The best stock pickers were buying. The number of long hedge fund positions increased by 11 recently. SBA Communications Corporation (NASDAQ:SBAC) was in 57 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 50. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SBAC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 46 hedge funds in our database with SBAC positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a look at the key hedge fund action encompassing SBA Communications Corporation (NASDAQ:SBAC).

What does smart money think about SBA Communications Corporation (NASDAQ:SBAC)?

At the end of June, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in SBAC 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.

Among these funds, Akre Capital Management held the most valuable stake in SBA Communications Corporation (NASDAQ:SBAC), which was worth $734.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $223.2 million worth of shares. Millennium Management, Two Sigma Advisors, and Holocene Advisors 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 Portsea Asset Management allocated the biggest weight to SBA Communications Corporation (NASDAQ:SBAC), around 36.83% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, dishing out 9.09 percent of its 13F equity portfolio to SBAC.

Now, specific money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, established the most valuable position in SBA Communications Corporation (NASDAQ:SBAC). Holocene Advisors had $113.1 million invested in the company at the end of the quarter. Jaime Sterne’s Skye Global Management also made a $56.6 million investment in the stock during the quarter. The other funds with brand new SBAC positions are Wayne Cooperman’s Cobalt Capital Management, Kevin Cottrell and Chris LaSusa’s KCL Capital, and Richard Walters II’s Stony Point Capital.

Let’s also examine hedge fund activity in other stocks similar to SBA Communications Corporation (NASDAQ:SBAC). We will take a look at Metlife Inc (NYSE:MET), Xcel Energy Inc (NASDAQ:XEL), HCA Healthcare Inc (NYSE:HCA), NXP Semiconductors NV (NASDAQ:NXPI), DocuSign, Inc. (NASDAQ:DOCU), Splunk Inc (NASDAQ:SPLK), and Orange SA (NYSE:ORAN). This group of stocks’ market values match SBAC’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $1309 million. That figure was $2166 million in SBAC’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. SBA Communications Corporation (NASDAQ:SBAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBAC is 79.7. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately SBAC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SBAC were disappointed as the stock returned 4.3% since the end of June (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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