In this article you are going to find out whether hedge funds think Synaptics Incorporated (NASDAQ:SYNA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. 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 predict the winners in the stock market.
Synaptics Incorporated (NASDAQ:SYNA) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare SYNA to other stocks including Coca-Cola Consolidated Inc. (NASDAQ:COKE), Principia Biopharma Inc. (NASDAQ:PRNB), and Steven Madden, Ltd. (NASDAQ:SHOO) to get a better sense of its popularity. 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 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 S&P 500 ETFs by 58 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 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.
[caption id="attachment_221556" align="aligncenter" width="399"] Richard Driehaus of Driehaus Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a glance at the recent hedge fund action regarding Synaptics Incorporated (NASDAQ:SYNA).
Hedge fund activity in Synaptics Incorporated (NASDAQ:SYNA)
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SYNA over the last 18 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Synaptics Incorporated (NASDAQ:SYNA), which was worth $93.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $72.7 million worth of shares. D E Shaw, Citadel Investment Group, and AQR Capital Management 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 Weld Capital Management allocated the biggest weight to Synaptics Incorporated (NASDAQ:SYNA), around 0.6% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.31 percent of its 13F equity portfolio to SYNA.
Since Synaptics Incorporated (NASDAQ:SYNA) has witnessed declining sentiment from the smart money, it's safe to say that there were a few funds who were dropping their positions entirely heading into Q4. It's worth mentioning that Cynthia Paul's Lynrock Lake sold off the largest stake of the 750 funds tracked by Insider Monkey, totaling close to $132.5 million in stock. Highbridge Capital Management, also dropped its stock, about $19.5 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Synaptics Incorporated (NASDAQ:SYNA). We will take a look at Coca-Cola Consolidated Inc. (NASDAQ:COKE), Principia Biopharma Inc. (NASDAQ:PRNB), Steven Madden, Ltd. (NASDAQ:SHOO), and Varonis Systems Inc (NASDAQ:VRNS). This group of stocks' market caps are similar to SYNA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COKE,9,14446,-2 PRNB,21,734674,1 SHOO,18,58658,-4 VRNS,20,387926,2 Average,17,298926,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $299 million. That figure was $346 million in SYNA's case. Principia Biopharma Inc. (NASDAQ:PRNB) is the most popular stock in this table. On the other hand Coca-Cola Consolidated Inc. (NASDAQ:COKE) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Synaptics Incorporated (NASDAQ:SYNA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately SYNA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SYNA were disappointed as the stock returned 10.1% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.