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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Sonic Automotive Inc (NYSE:SAH) based on those filings.
Is SAH a good stock to buy now? Sonic Automotive Inc (NYSE:SAH) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. SAH has experienced an increase in enthusiasm from smart money in recent months. There were 12 hedge funds in our database with SAH holdings at the end of June. Our calculations also showed that SAH 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a lot of gauges market participants employ to evaluate their stock investments. A pair of the most under-the-radar gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top money managers can outpace the market by a significant margin (see the details here).
Richard Driehaus of Driehaus Capital
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. Now we're going to review the fresh hedge fund action regarding Sonic Automotive Inc (NYSE:SAH).
Do Hedge Funds Think SAH Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 42% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SAH over the last 21 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Richard Driehaus's Driehaus Capital has the number one position in Sonic Automotive Inc (NYSE:SAH), worth close to $28.2 million, accounting for 0.6% of its total 13F portfolio. The second most bullish fund manager is Teewinot Capital Advisers, managed by Michael Moriarty, which holds a $12.9 million position; the fund has 5.5% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions encompass Brad Farber's Atika Capital, Ken Griffin's Citadel Investment Group and Chuck Royce's Royce & Associates. In terms of the portfolio weights assigned to each position Teewinot Capital Advisers allocated the biggest weight to Sonic Automotive Inc (NYSE:SAH), around 5.46% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, earmarking 0.88 percent of its 13F equity portfolio to SAH.
Now, key hedge funds were breaking ground themselves. Atika Capital, managed by Brad Farber, created the most valuable position in Sonic Automotive Inc (NYSE:SAH). Atika Capital had $10 million invested in the company at the end of the quarter. Chuck Royce's Royce & Associates also made a $8 million investment in the stock during the quarter. The other funds with brand new SAH positions are Mika Toikka's AlphaCrest Capital Management, Peter Muller's PDT Partners, and Donald Sussman's Paloma Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Sonic Automotive Inc (NYSE:SAH) but similarly valued. These stocks are Piedmont Office Realty Trust, Inc. (NYSE:PDM), Columbia Banking System Inc (NASDAQ:COLB), Oi SA (NYSE:OIBR), CareTrust REIT Inc (NASDAQ:CTRE), NanoString Technologies Inc (NASDAQ:NSTG), Turquoise Hill Resources Ltd (NYSE:TRQ), and Range Resources Corp. (NYSE:RRC). This group of stocks' market valuations are closest to SAH's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PDM,14,46030,3 COLB,11,77178,2 OIBR,6,70582,-1 CTRE,19,128517,0 NSTG,20,209225,3 TRQ,9,305017,-4 RRC,23,324952,0 Average,14.6,165929,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $81 million in SAH's case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Oi SA (NYSE:OIBR) is the least popular one with only 6 bullish hedge fund positions. Sonic Automotive Inc (NYSE:SAH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAH is 67.9. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately SAH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SAH were disappointed as the stock returned 0% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.