Hedge Funds Are Betting On Sonic Corporation (SONC)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Sonic Corporation (NASDAQ:SONC)? The smart money sentiment can provide an answer to this question.

Is Sonic Corporation (NASDAQ:SONC) undervalued? The smart money is taking a bullish view. The number of long hedge fund positions advanced by 6 lately. At the end of this article we will also compare SONC to other stocks including Apollo Group Inc (NASDAQ:APOL), Cott Corporation (USA) (NYSE:COT), and Finisar Corporation (NASDAQ:FNSR) to get a better sense of its popularity.

Keeping this in mind, let’s check out the latest action regarding Sonic Corporation (NASDAQ:SONC).

What does the smart money think about Sonic Corporation (NASDAQ:SONC)?

At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Richard Chilton’s Chilton Investment Company has the largest position in Sonic Corporation (NASDAQ:SONC), worth close to $72.2 million, corresponding to 2.6% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, led by Israel Englander, holding a $33.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Dmitry Balyasny’s Balyasny Asset Management, Steve Cohen’s Point72 Asset Management and Lee Munder’s Lee Munder Capital Group.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Lee Munder Capital Group, managed by Lee Munder, established the most outsized position in Sonic Corporation (NASDAQ:SONC). Lee Munder Capital Group had $12.2 million invested in the company at the end of the quarter. John Croghan and Richard Fradin’s Rail-Splitter Capital Management also made a $7.2 million investment in the stock during the quarter. The following funds were also among the new SONC investors: Peter Muller’s PDT Partners, John Overdeck and David Siegel’s Two Sigma Advisors, and Chao Ku’s Nine Chapters Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Sonic Corporation (NASDAQ:SONC). These stocks are Apollo Group Inc (NASDAQ:APOL), Cott Corporation (USA) (NYSE:COT), Finisar Corporation (NASDAQ:FNSR), and TriNet Group Inc (NYSE:TNET). This group of stocks’ market values are similar to SONC’s market value.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $224 million. That figure was $205 million in SONC’s case. Apollo Group Inc (NASDAQ:APOL) is the most popular stock in this table. On the other hand TriNet Group Inc (NYSE:TNET) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Sonic Corporation (NASDAQ:SONC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.