As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about SYNNEX Corporation (NYSE:SNX) in this article.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to review the latest hedge fund action encompassing SYNNEX Corporation (NYSE:SNX).
How have hedgies been trading SYNNEX Corporation (NYSE:SNX)?
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in SNX a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in SYNNEX Corporation (NYSE:SNX) was held by Citadel Investment Group, which reported holding $47.8 million worth of stock at the end of September. It was followed by Alyeska Investment Group with a $47.5 million position. Other investors bullish on the company included AQR Capital Management, Two Sigma Advisors, and Millennium Management.
Judging by the fact that SYNNEX Corporation (NYSE:SNX) has faced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers that decided to sell off their positions entirely in the third quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the biggest position of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $7.2 million in stock, and Matthew Tewksbury's Stevens Capital Management was right behind this move, as the fund said goodbye to about $2.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 6 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as SYNNEX Corporation (NYSE:SNX) but similarly valued. These stocks are Medidata Solutions Inc (NASDAQ:MDSO), Compania de Minas Buenaventura SA (NYSE:BVN), Eaton Vance Corp (NYSE:EV), and VEON Ltd. (NASDAQ:VEON). All of these stocks' market caps match SNX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MDSO,11,145668,-3 BVN,6,22122,2 EV,17,125546,2 VEON,9,27679,2 Average,10.75,80254,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $164 million in SNX's case. Eaton Vance Corp (NYSE:EV) is the most popular stock in this table. On the other hand Compania de Minas Buenaventura SA (NYSE:BVN) is the least popular one with only 6 bullish hedge fund positions. SYNNEX Corporation (NYSE:SNX) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on SNX as the stock returned 31.4% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.