World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Sabre Corporation (NASDAQ:SABR) has seen an increase in activity from the world’s largest hedge funds recently. SABR was in 31 hedge funds’ portfolios at the end of September. There were 25 hedge funds in our database with SABR positions at the end of the previous quarter. Our calculations also showed that SABR isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a peek at the key hedge fund action regarding Sabre Corporation (NASDAQ:SABR).
How are hedge funds trading Sabre Corporation (NASDAQ:SABR)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in SABR over the last 13 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, Silver Lake Partners was the largest shareholder of Sabre Corporation (NASDAQ:SABR), with a stake worth $248.5 million reported as of the end of September. Trailing Silver Lake Partners was Millennium Management, which amassed a stake valued at $59 million. D E Shaw, Two Sigma Advisors, and MD Sass were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers have been driving this bullishness. Elliott Management, managed by Paul Singer, assembled the biggest position in Sabre Corporation (NASDAQ:SABR). Elliott Management had $15.4 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $8.5 million investment in the stock during the quarter. The following funds were also among the new SABR investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Andre F. Perold’s HighVista Strategies, and David Andre and Astro Teller’s Cerebellum Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Sabre Corporation (NASDAQ:SABR) but similarly valued. These stocks are Flowserve Corporation (NYSE:FLS), Gerdau SA (NYSE:GGB), NIO Inc. (NYSE:NIO), and PRA Health Sciences Inc (NASDAQ:PRAH). This group of stocks’ market valuations match SABR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FLS | 13 | 329809 | -1 |
| GGB | 15 | 243035 | -5 |
| NIO | 14 | 100015 | 14 |
| PRAH | 28 | 276032 | 3 |
| Average | 17.5 | 237223 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $606 million in SABR’s case. PRA Health Sciences Inc (NASDAQ:PRAH) is the most popular stock in this table. On the other hand Flowserve Corporation (NYSE:FLS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Sabre Corporation (NASDAQ:SABR) 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.
Disclosure: None. This article was originally published at Insider Monkey.
