We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sabra Health Care REIT Inc (NASDAQ:SBRA).
Sabra Health Care REIT Inc (NASDAQ:SBRA) shareholders have witnessed a decrease in hedge fund interest of late. What is quite surprising is that the hedge fund sentiment was similar to that of the market sentiment, as the shares of Sabra Health Care REIT Inc (NASDAQ:SBRA) lost 9.95% value during the quarter. In order to understand the hedge fund behavior, we will find out more about hedgies that had positions in Sabra Health Care REIT Inc (NASDAQ:SBRA), at the end of the last quarter.
At the end of this article we will also compare Sabra Health Care REIT Inc (NASDAQ:SBRA) to other stocks, including Compania de Minas Buenaventura SA (ADR) (NYSE:BVN), Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), and Magellan Health Services Inc (NASDAQ:MGLN) to get a better sense of its popularity.
Follow Sabra Health Care Reit Inc. (NASDAQ:SBRA)
Follow Sabra Health Care Reit Inc. (NASDAQ:SBRA)
To most stock holders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are over 8000 funds trading at the moment, we look at the top tier of this club, around 700 funds. These investment experts command bulk of all hedge funds’ total capital, and by watching their best investments, Insider Monkey has uncovered a number of investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, let’s take a look at the latest action surrounding Sabra Health Care REIT Inc (NASDAQ:SBRA).
Hedge fund activity in Sabra Health Care REIT Inc (NASDAQ:SBRA)
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 33% from the previous quarter. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, J. Alan Reid, Jr.’s Forward Management has the biggest position in Sabra Health Care REIT Inc (NASDAQ:SBRA), worth close to $37.3 million, amounting to 3% of its total 13F portfolio. The second most bullish fund manager is Highland Capital Management, led by James Dondero, holding a $14.2 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Israel Englander’s Millennium Management, Rod Hinze’s KeyPoint Capital Management, and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Sabra Health Care REIT Inc (NASDAQ:SBRA) has experienced a declination in interest from the smart money, it’s easy to see that there lies a certain “tier” of funds who sold off their positions entirely in the third quarter. At the top of the heap, Nick Niell’s Arrowgrass Capital Partners said goodbye to the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $3.2 million in stock, and Arthur Wrubel’s Wesley Capital Management was right behind this move, as the fund cut about $2.1 million worth of shares. These moves are important to note, as total hedge fund interest dropped by 4 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Sabra Health Care REIT Inc (NASDAQ:SBRA). These stocks are Compania de Minas Buenaventura SA (ADR) (NYSE:BVN), Nexstar Broadcasting Group, Inc. (NASDAQ:NXST), Magellan Health Services Inc (NASDAQ:MGLN), and Virgin America Inc (NASDAQ:VA). This group of stocks’ market caps are similar to Sabra Health Care REIT Inc (NASDAQ:SBRA)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BVN | 7 | 8211 | -2 |
| NXST | 34 | 537161 | 7 |
| MGLN | 18 | 256703 | 4 |
| VA | 21 | 586491 | 9 |
As you can see, these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $62 million in Sabra Health Care REIT Inc (NASDAQ:SBRA)’s case. Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) is the most popular stock in this table. On the other hand, Compania de Minas Buenaventura SA (ADR) (NYSE:BVN) is the least popular one with only 7 bullish hedge fund positions. Sabra Health Care REIT Inc (NASDAQ:SBRA) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Nexstar Broadcasting Group, Inc. (NASDAQ:NXST) might be a better candidate to consider a long position.
