Is Sabine Royalty Trust (SBR) A Good Stock To Buy?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Sabine Royalty Trust (NYSE:SBR).

Is SBR a good stock to buy? The smart money was taking a bullish view. The number of long hedge fund bets went up by 1 recently. Sabine Royalty Trust (NYSE:SBR) was in 5 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 8. Our calculations also showed that SBR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the recent hedge fund action encompassing Sabine Royalty Trust (NYSE:SBR).

Do Hedge Funds Think SBR Is A Good Stock To Buy Now?

At first quarter’s end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SBR over the last 23 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Wildcat Capital Management held the most valuable stake in Sabine Royalty Trust (NYSE:SBR), which was worth $10.1 million at the end of the fourth quarter. On the second spot was Royce & Associates which amassed $2.5 million worth of shares. Millennium Management, Citadel Investment Group, and Horizon Asset Management were 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 Wildcat Capital Management allocated the biggest weight to Sabine Royalty Trust (NYSE:SBR), around 1.23% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.02 percent of its 13F equity portfolio to SBR.

As aggregate interest increased, specific money managers have jumped into Sabine Royalty Trust (NYSE:SBR) headfirst. Millennium Management, managed by Israel Englander, assembled the most valuable position in Sabine Royalty Trust (NYSE:SBR). Millennium Management had $0.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.3 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks similar to Sabine Royalty Trust (NYSE:SBR). These stocks are Limelight Networks, Inc. (NASDAQ:LLNW), Landsea Homes Corporation (NASDAQ:LSEA), Holicity Inc. (NASDAQ:HOL), Sesen Bio, Inc. (NASDAQ:SESN), Berry Corporation (NASDAQ:BRY), Capital Southwest Corporation (NASDAQ:CSWC), and Bar Harbor Bankshares (NYSE:BHB). This group of stocks’ market valuations are similar to SBR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $14 million in SBR’s case. Holicity Inc. (NASDAQ:HOL) is the most popular stock in this table. On the other hand Bar Harbor Bankshares (NYSE:BHB) is the least popular one with only 2 bullish hedge fund positions. Sabine Royalty Trust (NYSE:SBR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SBR is 38.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on SBR as the stock returned 27.4% since the end of the first quarter (through 6/18) and outperformed the market by an even larger margin.

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