Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Sabre Corporation (NASDAQ:SABR) from the perspective of those elite funds.
Is Sabre Corporation (NASDAQ:SABR) the right investment to pursue these days? The smart money is in a bearish mood. The number of long hedge fund bets retreated by 7 in recent months. Our calculations also showed that SABR isn’t among the 30 most popular stocks among hedge funds. SABR was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 31 hedge funds in our database with SABR holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s view the recent hedge fund action surrounding Sabre Corporation (NASDAQ:SABR).
How are hedge funds trading Sabre Corporation (NASDAQ:SABR)?
Heading into the first quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SABR over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Jeffrey Talpins’s Element Capital Management has the biggest position in Sabre Corporation (NASDAQ:SABR), worth close to $122.7 million, accounting for 3.5% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which holds a $40 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism consist of Martin D. Sass’s MD Sass, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors.
Because Sabre Corporation (NASDAQ:SABR) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedgies that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Jim Davidson, Dave Roux and Glenn Hutchins’s Silver Lake Partners cut the largest stake of all the hedgies tracked by Insider Monkey, comprising about $248.5 million in call options, and Paul Singer’s Elliott Management was right behind this move, as the fund dropped about $26.1 million worth. These moves are important to note, as total hedge fund interest dropped by 7 funds by the end of the third quarter.
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 Post Holdings Inc (NYSE:POST), The Toro Company (NYSE:TTC), Cimarex Energy Co (NYSE:XEC), and AptarGroup, Inc. (NYSE:ATR). All of these stocks’ market caps are similar to SABR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| POST | 28 | 1337378 | -1 |
| TTC | 21 | 472099 | 0 |
| XEC | 28 | 1080892 | 5 |
| ATR | 17 | 62626 | 4 |
| Average | 23.5 | 738249 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $738 million. That figure was $276 million in SABR’s case. Post Holdings Inc (NYSE:POST) is the most popular stock in this table. On the other hand AptarGroup, Inc. (NYSE:ATR) is the least popular one with only 17 bullish hedge fund positions. Sabre Corporation (NASDAQ:SABR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately SABR wasn’t in this group. Hedge funds that bet on SABR were disappointed as the stock returned .9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
