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Was The Smart Money Right About SBA Communications (SBAC)?

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·6 min read
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In this article we will take a look at whether hedge funds think SBA Communications Corporation (NASDAQ:SBAC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Hedge fund interest in SBA Communications Corporation (NASDAQ:SBAC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SBAC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Royalty Pharma Plc (NASDAQ:RPRX), ANSYS, Inc. (NASDAQ:ANSS), and AFLAC Incorporated (NYSE:AFL) to gather more data points.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Stuart Zimmer Zimmer Partners
Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 take a look at the key hedge fund action surrounding SBA Communications Corporation (NASDAQ:SBAC).

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

At the end of the fourth quarter, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 45 hedge funds with a bullish position in SBAC a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Among these funds, Akre Capital Management held the most valuable stake in SBA Communications Corporation (NASDAQ:SBAC), which was worth $695.5 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $206.7 million worth of shares. Two Sigma Advisors, Skye Global Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Land & Buildings Investment Management allocated the biggest weight to SBA Communications Corporation (NASDAQ:SBAC), around 6.45% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, earmarking 5.17 percent of its 13F equity portfolio to SBAC.

Seeing as SBA Communications Corporation (NASDAQ:SBAC) has experienced declining sentiment from hedge fund managers, it's easy to see that there was a specific group of hedge funds that slashed their entire stakes in the fourth quarter. Intriguingly, Gabriel Plotkin's Melvin Capital Management dropped the largest investment of the 750 funds watched by Insider Monkey, comprising close to $95.5 million in stock. Cyrus de Weck's fund, Portsea Asset Management, also dropped its stock, about $30 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks similar to SBA Communications Corporation (NASDAQ:SBAC). These stocks are Royalty Pharma Plc (NASDAQ:RPRX), ANSYS, Inc. (NASDAQ:ANSS), AFLAC Incorporated (NYSE:AFL), Credit Suisse Group AG (NYSE:CS), Kinder Morgan Inc (NYSE:KMI), Prudential Financial Inc (NYSE:PRU), and Hilton Worldwide Holdings Inc (NYSE:HLT). All of these stocks' market caps match SBAC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RPRX,18,3384693,-2 ANSS,40,1633274,0 AFL,35,389034,1 CS,11,46020,-2 KMI,42,1031459,-4 PRU,36,532348,2 HLT,60,6029309,3 Average,34.6,1863734,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $1864 million. That figure was $1762 million in SBAC's case. Hilton Worldwide Holdings Inc (NYSE:HLT) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 11 bullish hedge fund positions. SBA Communications Corporation (NASDAQ:SBAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBAC is 60.3. 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. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately SBAC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SBAC were disappointed as the stock returned 6.5% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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