Hedge Funds Were Wrong About Loading Up On Sabre Corporation (SABR)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Sabre Corporation (NASDAQ:SABR) in this article.

Sabre Corporation (NASDAQ:SABR) has seen an increase in support from the world’s most elite money managers lately. Sabre Corporation (NASDAQ:SABR) was in 39 hedge funds’ portfolios at the end of June. The all time high for this statistics is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 30 hedge funds in our database with SABR positions at the end of the first quarter. Our calculations also showed that SABR 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).

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.

Jeffrey Tannenbaum of Fir Tree

At Insider Monkey we scour multiple sources to uncover 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 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 go over the new hedge fund action regarding Sabre Corporation (NASDAQ:SABR).

How are hedge funds trading Sabre Corporation (NASDAQ:SABR)?

At the end of June, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SABR over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Sabre Corporation (NASDAQ:SABR) was held by Yiheng Capital, which reported holding $76 million worth of stock at the end of June. It was followed by SRS Investment Management with a $60.7 million position. Other investors bullish on the company included D E Shaw, PAR Capital Management, and Sirios Capital Management. In terms of the portfolio weights assigned to each position White Square Capital allocated the biggest weight to Sabre Corporation (NASDAQ:SABR), around 3.95% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, earmarking 3.79 percent of its 13F equity portfolio to SABR.

Now, key hedge funds were breaking ground themselves. Yiheng Capital, managed by Jonathan Guo, created the biggest position in Sabre Corporation (NASDAQ:SABR). Yiheng Capital had $76 million invested in the company at the end of the quarter. Paul Reeder and Edward Shapiro’s PAR Capital Management also made a $37.5 million investment in the stock during the quarter. The other funds with brand new SABR positions are John Brennan’s Sirios Capital Management, Jeffrey Tannenbaum’s Fir Tree, and Stephen Mildenhall’s Contrarius Investment Management.

Let’s now take a look at hedge fund activity in other stocks similar to Sabre Corporation (NASDAQ:SABR). These stocks are NCR Corporation (NYSE:NCR), Independent Bank Corp (NASDAQ:INDB), Viela Bio, Inc. (NASDAQ:VIE), Pacira Biosciences Inc (NASDAQ:PCRX), Vishay Intertechnology, Inc. (NYSE:VSH), Sensient Technologies Corporation (NYSE:SXT), and LGI Homes Inc (NASDAQ:LGIH). This group of stocks’ market values are similar to SABR’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $412 million in SABR’s case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 7 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Unfortunately SABR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SABR were disappointed as the stock returned -19.1% since the end of the second quarter (through 10/30) 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.

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