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

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded SBA Communications Corporation (NASDAQ:SBAC) and determine whether the smart money was really smart about this stock.

Is SBA Communications Corporation (NASDAQ:SBAC) a buy, sell, or hold? Money managers were getting more bullish. The number of long hedge fund positions moved up by 1 lately. Our calculations also showed that SBAC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). SBAC was in 46 hedge funds’ portfolios at the end of March. There were 45 hedge funds in our database with SBAC positions at the end of the previous quarter.

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 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.

Och-Ziff Capital Management

Daniel Och, Founder of OZ Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the key hedge fund action encompassing SBA Communications Corporation (NASDAQ:SBAC).

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

At Q1’s end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. On the other hand, there were a total of 29 hedge funds with a bullish position in SBAC a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is SBAC A Good Stock To Buy?

More specifically, Akre Capital Management was the largest shareholder of SBA Communications Corporation (NASDAQ:SBAC), with a stake worth $665.5 million reported as of the end of September. Trailing Akre Capital Management was Renaissance Technologies, which amassed a stake valued at $279.1 million. Citadel Investment Group, Two Sigma Advisors, and Arrowstreet Capital 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 51.45% of its 13F portfolio. Land & Buildings Investment Management is also relatively very bullish on the stock, earmarking 14.95 percent of its 13F equity portfolio to SBAC.

As one would reasonably expect, some big names were leading the bulls’ herd. Portsea Asset Management, managed by Cyrus de Weck, established the most outsized position in SBA Communications Corporation (NASDAQ:SBAC). Portsea Asset Management had $57.1 million invested in the company at the end of the quarter. Brett Barakett’s Tremblant Capital also initiated a $39.4 million position during the quarter. The other funds with brand new SBAC positions are Dmitry Balyasny’s Balyasny Asset Management, Charles Clough’s Clough Capital Partners, and Mark Coe’s Intrinsic Edge Capital.

Let’s now take a look at hedge fund activity in other stocks similar to SBA Communications Corporation (NASDAQ:SBAC). We will take a look at Monster Beverage Corp (NASDAQ:MNST), The Kraft Heinz Company (NASDAQ:KHC), General Motors Company (NYSE:GM), and Workday Inc (NYSE:WDAY). This group of stocks’ market valuations match SBAC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MNST 43 1843978 -2
KHC 39 8314956 5
GM 53 3020405 -22
WDAY 58 2259501 3
Average 48.25 3859710 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.25 hedge funds with bullish positions and the average amount invested in these stocks was $3860 million. That figure was $1835 million in SBAC’s case. Workday Inc (NYSE:WDAY) is the most popular stock in this table. On the other hand The Kraft Heinz Company (NASDAQ:KHC) is the least popular one with only 39 bullish hedge fund positions. SBA Communications Corporation (NASDAQ:SBAC) 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. 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 12.3% in 2020 through June 30th and surpassed the market by 15.5 percentage points. Unfortunately SBAC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SBAC investors were disappointed as the stock returned 10.5% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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