In this article we will check out the progression of hedge fund sentiment towards SilverBow Resorces, Inc. (NYSE:SBOW) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
SilverBow Resorces, Inc. (NYSE:SBOW) investors should pay attention to a decrease in hedge fund interest in recent months. SBOW was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with SBOW positions at the end of the previous quarter. Our calculations also showed that SBOW isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Halbower of Pentwater Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the fresh hedge fund action encompassing SilverBow Resorces, Inc. (NYSE:SBOW).
Hedge fund activity in SilverBow Resorces, Inc. (NYSE:SBOW)
Heading into the second quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in SBOW a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Strategic Value Partners held the most valuable stake in SilverBow Resorces, Inc. (NYSE:SBOW), which was worth $11.1 million at the end of the third quarter. On the second spot was Pentwater Capital Management which amassed $1.2 million worth of shares. Marshall Wace LLP was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Strategic Value Partners allocated the biggest weight to SilverBow Resorces, Inc. (NYSE:SBOW), around 3.48% of its 13F portfolio. Pentwater Capital Management is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to SBOW.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Bailard Inc. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified SBOW as a viable investment and initiated a position in the stock.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as SilverBow Resorces, Inc. (NYSE:SBOW) but similarly valued. We will take a look at SRAX, Inc. (NASDAQ:SRAX), NCS Multistage Holdings, Inc. (NASDAQ:NCSM), NetSol Technologies Inc. (NASDAQ:NTWK), and ImmuCell Corporation (NASDAQ:ICCC). This group of stocks’ market valuations are closest to SBOW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRAX | 1 | 244 | 0 |
| NCSM | 2 | 57 | -1 |
| NTWK | 4 | 4247 | -1 |
| ICCC | 2 | 502 | -1 |
| Average | 2.25 | 1263 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $12 million in SBOW’s case. NetSol Technologies Inc. (NASDAQ:NTWK) is the most popular stock in this table. On the other hand SRAX, Inc. (NASDAQ:SRAX) is the least popular one with only 1 bullish hedge fund positions. SilverBow Resorces, Inc. (NYSE:SBOW) is not the most popular stock in this group but hedge fund interest is still above average. 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on SBOW as the stock returned 66% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
