San Juan Basin Royalty Trust (SJT): Is It A Good Stock to Buy?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze San Juan Basin Royalty Trust (NYSE:SJT).

San Juan Basin Royalty Trust (NYSE:SJT) has seen a decrease in support from the world’s most successful money managers lately. SJT was in 6 hedge funds’ portfolios at the end of the third quarter of 2016. There were 7 hedge funds in our database with SJT positions at the end of the second quarter. At the end of this article we will also compare SJT to other stocks including Oil-Dri Corporation of America (NYSE:ODC), Mitek Systems, Inc. (NASDAQ:MITK), and AxoGen, Inc. (NASDAQ:AXGN) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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How are hedge funds trading San Juan Basin Royalty Trust (NYSE:SJT)?

At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a 14% decrease from one quarter earlier, dropping hedge fund ownership to a yearly low. Below, you can check out the change in hedge fund sentiment towards SJT over the last 5 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the biggest position in San Juan Basin Royalty Trust (NYSE:SJT), worth close to $7.7 million. The second largest stake is held by MFP Investors, led by Michael Price, which holds a $0.6 million position. Other peers with similar optimism consist of Russell Hawkins’ Hawkins Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and Ken Griffin’s Citadel Investment Group. We should note that MFP Investors is among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Seeing as San Juan Basin Royalty Trust (NYSE:SJT) has weathered declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies who were dropping their entire stakes last quarter. Interestingly, First Eagle Investment Management sold off the largest stake of all the hedgies watched by Insider Monkey, totaling an estimated $39.6 million in stock. Millennium Management, one of the largest hedge funds in the world, also dropped its stock, about $0.1 million worth.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as San Juan Basin Royalty Trust (NYSE:SJT) but similarly valued. We will take a look at Oil-Dri Corporation of America (NYSE:ODC), Mitek Systems, Inc. (NASDAQ:MITK), AxoGen, Inc. (NASDAQ:AXGN), and Parker Drilling Company (NYSE:PKD). This group of stocks’ market values are similar to SJT’s market value.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $9 million in SJT’s case. Mitek Systems, Inc. (NASDAQ:MITK) is the most popular stock in this table. On the other hand Oil-Dri Corporation of America (NYSE:ODC) is the least popular one with only 5 bullish hedge fund positions. San Juan Basin Royalty Trust (NYSE:SJT) 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 MITK might be a better candidate to consider taking a long position in.

Disclosure: None