Is SBOW Stock A Buy Here?

In this article we are going to use hedge fund sentiment as a tool and determine whether SilverBow Resorces, Inc. (NYSE:SBOW) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is SBOW stock a buy? SilverBow Resorces, Inc. (NYSE:SBOW) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 11. SBOW has experienced a decrease in activity from the world’s largest hedge funds lately. There were 6 hedge funds in our database with SBOW holdings at the end of December. Our calculations also showed that SBOW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $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. With all of this in mind we’re going to review the recent hedge fund action surrounding SilverBow Resorces, Inc. (NYSE:SBOW).

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

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the fourth quarter of 2020. By comparison, 3 hedge funds held shares or bullish call options in SBOW a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Strategic Value Partners, managed by Victor Khosla, holds the most valuable position in SilverBow Resorces, Inc. (NYSE:SBOW). Strategic Value Partners has a $34.8 million position in the stock, comprising 42.1% of its 13F portfolio. Coming in second is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $1.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism contain Israel Englander’s Millennium Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and . In terms of the portfolio weights assigned to each position Strategic Value Partners allocated the biggest weight to SilverBow Resorces, Inc. (NYSE:SBOW), around 42.07% of its 13F portfolio. Adage Capital Management is also relatively very bullish on the stock, setting aside 0.0034 percent of its 13F equity portfolio to SBOW.

Due to the fact that SilverBow Resorces, Inc. (NYSE:SBOW) has witnessed falling interest from the smart money, we can see that there is a sect of money managers who sold off their entire stakes last quarter. Intriguingly, Matthew Halbower’s Pentwater Capital Management cut the biggest stake of the 750 funds monitored by Insider Monkey, worth an estimated $1.3 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to SilverBow Resorces, Inc. (NYSE:SBOW). We will take a look at Cortland Bancorp (NASDAQ:CLDB), NexPoint Real Estate Finance, Inc. (NYSE:NREF), Epsilon Energy Ltd. (NASDAQ:EPSN), Consumer Portfolio Services, Inc. (NASDAQ:CPSS), AIM ImmunoTech Inc. (NYSE:AIM), Affinity Bancshares, Inc. (NASDAQ:AFBI), and voxeljet AG (NASDAQ:VJET). This group of stocks’ market valuations are closest to SBOW’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $37 million in SBOW’s case. AIM ImmunoTech Inc. (NYSE:AIM) is the most popular stock in this table. On the other hand Consumer Portfolio Services, Inc. (NASDAQ:CPSS) 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 overall hedge fund sentiment score for SBOW is 63.9. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on SBOW as the stock returned 191% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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