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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of SandRidge Energy Inc. (NYSE:SD).
Should we buy SandRidge Energy Inc. (SD)? Money managers were in an optimistic mood. The number of long hedge fund positions rose by 1 in recent months. SandRidge Energy Inc. (NYSE:SD) was in 14 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. Our calculations also showed that SD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 13 hedge funds in our database with SD holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let's take a glance at the recent hedge fund action regarding SandRidge Energy Inc. (NYSE:SD).
Do Hedge Funds Think SD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the second quarter of 2020. By comparison, 19 hedge funds held shares or bullish call options in SD 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Icahn Capital LP, managed by Carl Icahn, holds the number one position in SandRidge Energy Inc. (NYSE:SD). Icahn Capital LP has a $8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Cannell Capital, managed by J. Carlo Cannell, which holds a $5.1 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Renaissance Technologies, John Paulson's Paulson & Co and Jerome L. Simon's Lonestar Capital Management. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to SandRidge Energy Inc. (NYSE:SD), around 1.85% of its 13F portfolio. Roumell Asset Management is also relatively very bullish on the stock, earmarking 0.38 percent of its 13F equity portfolio to SD.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Lonestar Capital Management, managed by Jerome L. Simon, created the most outsized position in SandRidge Energy Inc. (NYSE:SD). Lonestar Capital Management had $0.8 million invested in the company at the end of the quarter. Nick Thakore's Diametric Capital also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is Peter Algert's Algert Global.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as SandRidge Energy Inc. (NYSE:SD) but similarly valued. These stocks are Savara, Inc. (NASDAQ:SVRA), Huttig Building Products, Inc. (NASDAQ:HBP), 180 Degree Capital Corp. (NASDAQ:TURN), Vascular Biogenics Ltd. (NASDAQ:VBLT), Reed's, Inc. (NYSE:REED), Akarti Therapeutics PLC (NASDAQ:AKTX), and Aware, Inc. (NASDAQ:AWRE). This group of stocks' market values match SD's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SVRA,9,6958,0 HBP,2,1683,-1 TURN,3,5137,0 VBLT,1,748,-1 REED,5,2532,-1 AKTX,1,189,-2 AWRE,3,7502,0 Average,3.4,3536,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.4 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $19 million in SD's case. Savara, Inc. (NASDAQ:SVRA) is the most popular stock in this table. On the other hand Vascular Biogenics Ltd. (NASDAQ:VBLT) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks SandRidge Energy Inc. (NYSE:SD) is more popular among hedge funds. Our overall hedge fund sentiment score for SD is 74.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on SD as the stock returned 82.4% since the end of September (through 12/8) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.