Is SBH Stock A Buy or Sell?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Sally Beauty Holdings, Inc. (NYSE:SBH) in this article.

Is SBH stock a buy? Sally Beauty Holdings, Inc. (NYSE:SBH) investors should be aware of a decrease in hedge fund sentiment of late. Sally Beauty Holdings, Inc. (NYSE:SBH) was in 23 hedge funds’ portfolios at the end of December. The all time high for this statistic is 28. Our calculations also showed that SBH isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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 Fisher of Fisher Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Keeping this in mind we’re going to take a peek at the key hedge fund action encompassing Sally Beauty Holdings, Inc. (NYSE:SBH).

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

At the end of the fourth quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in SBH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the biggest position in Sally Beauty Holdings, Inc. (NYSE:SBH), worth close to $60.8 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Fisher Asset Management, managed by Ken Fisher, which holds a $28.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish include Cliff Asness’s AQR Capital Management, Michael Zimmerman’s Prentice Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Sally Beauty Holdings, Inc. (NYSE:SBH), around 4.45% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, designating 2.72 percent of its 13F equity portfolio to SBH.

Due to the fact that Sally Beauty Holdings, Inc. (NYSE:SBH) has witnessed a decline in interest from the smart money, we can see that there was a specific group of money managers that decided to sell off their positions entirely last quarter. It’s worth mentioning that Joe DiMenna’s ZWEIG DIMENNA PARTNERS cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $3.9 million in stock, and Ira Unschuld’s Brant Point Investment Management was right behind this move, as the fund cut about $3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Sally Beauty Holdings, Inc. (NYSE:SBH). We will take a look at Cytokinetics, Inc. (NASDAQ:CYTK), Mesa Laboratories, Inc. (NASDAQ:MLAB), Marcus & Millichap Inc (NYSE:MMI), Surgery Partners, Inc. (NASDAQ:SGRY), Antero Resources Corp (NYSE:AR), HighPeak Energy, Inc. (NASDAQ:HPK), and Heartland Express, Inc. (NASDAQ:HTLD). This group of stocks’ market valuations resemble SBH’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $184 million in SBH’s case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand HighPeak Energy, Inc. (NASDAQ:HPK) is the least popular one with only 1 bullish hedge fund positions. Sally Beauty Holdings, Inc. (NYSE:SBH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBH is 62.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on SBH as the stock returned 54.9% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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