Is Sabra Health Care REIT Inc (NASDAQ:SBRA) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to find the winners in the stock market.
Sabra Health Care REIT Inc (NASDAQ:SBRA) shareholders have witnessed an increase in enthusiasm from smart money recently. SBRA was in 15 hedge funds' portfolios at the end of December. There were 9 hedge funds in our database with SBRA holdings at the end of the previous quarter. Our calculations also showed that SBRA isn't among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's analyze the new hedge fund action regarding Sabra Health Care REIT Inc (NASDAQ:SBRA).
What does the smart money think about Sabra Health Care REIT Inc (NASDAQ:SBRA)?
At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 67% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in SBRA a year ago. With the smart money's sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Sabra Health Care REIT Inc (NASDAQ:SBRA), which was worth $20.4 million at the end of the third quarter. On the second spot was D E Shaw which amassed $15.1 million worth of shares. Moreover, Arrowstreet Capital, Forward Management, and Millennium Management were also bullish on Sabra Health Care REIT Inc (NASDAQ:SBRA), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key hedge funds have jumped into Sabra Health Care REIT Inc (NASDAQ:SBRA) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in Sabra Health Care REIT Inc (NASDAQ:SBRA). Arrowstreet Capital had $12.2 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also initiated a $1.4 million position during the quarter. The other funds with brand new SBRA positions are Paul Tudor Jones's Tudor Investment Corp, Cliff Asness's AQR Capital Management, and Matthew Tewksbury's Stevens Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Sabra Health Care REIT Inc (NASDAQ:SBRA) but similarly valued. These stocks are Newfield Exploration Co. (NYSE:NFX), Bank OZK (NASDAQ:OZK), Physicians Realty Trust (NYSE:DOC), and Valero Energy Partners LP (NYSE:VLP). This group of stocks' market valuations are closest to SBRA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFX,34,330966,-5 OZK,18,216630,8 DOC,12,93423,3 VLP,7,87725,4 Average,17.75,182186,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $82 million in SBRA's case. Newfield Exploration Co. (NYSE:NFX) is the most popular stock in this table. On the other hand Valero Energy Partners LP (NYSE:VLP) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on SBRA, though not to the same extent, as the stock returned 16.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.