Here is What Hedge Funds Think About SandRidge Energy Inc. (SD)

The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on SandRidge Energy Inc. (NYSE:SD) in order to identify whether reputable and successful top money managers continue to believe in its potential.

SandRidge Energy Inc. investors should be aware of an increase in hedge fund interest lately. SD was in 20 hedge funds’ portfolios at the end of the third quarter of 2015. There were 18 hedge funds in our database with SD positions at the end of the previous quarter. At the end of this article we will also compare SD to other stocks, including Datalink Corporation (NASDAQ:DTLK), Silicon Graphics International Corp (NASDAQ:SGI), and Bioamber Inc (NYSE:BIOA) to get a better sense of its popularity.

In today’s marketplace there are a large number of signals shareholders put to use to value their holdings. A pair of the less utilized signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top money managers can beat their index-focused peers by a healthy margin (see the details here).

With all of this in mind, we’re going to go over the latest action surrounding SandRidge Energy Inc. (NYSE:SD).

How have hedgies been trading SandRidge Energy Inc. (NYSE:SD)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 11% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Fairfax Financial Holdings, managed by Prem Watsa, holds the number one position in SandRidge Energy Inc. (NYSE:SD). The fund reportedly holds a $15.5 million position in the stock, comprising 1.4% of its 13F portfolio. The second most bullish fund manager is GMT Capital, managed by Thomas E. Claugus, which holds a $5.6 million stake; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Michael Kao’s Akanthos Capital, Jim Simons’s Renaissance Technologies and Mark McGoldrick and Jason Maynard’s Mount Kellett Capital Management.

As aggregate interest increased, key money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, assembled the most outsized position in SandRidge Energy Inc. (NYSE:SD), having invested $2.8 million in the company by the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $0.3 million position during the quarter. The other funds with brand new SD positions are Jerome L. Simon’s Lonestar Capital Management, John Paulson’s Paulson & Co, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks similar to SandRidge Energy Inc. (NYSE:SD). We will take a look at Datalink Corporation (NASDAQ:DTLK), Silicon Graphics International Corp (NASDAQ:SGI), Bioamber Inc (NYSE:BIOA), and Southern National Banc. of Virginia, Inc (NASDAQ:SONA). All of these stocks’ market caps are closest to SD’s market cap.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $33 million in SD’s case. Datalink Corporation (NASDAQ:DTLK) is the most popular stock in this table. On the other hand Southern National Banc. of Virginia, Inc (NASDAQ:SONA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks SandRidge Energy Inc. (NYSE:SD) is clearly more popular among hedge funds, and we consider it may be a good idea to analyze it in detail and potentially include it in your portfolio.