- Oops!Something went wrong.Please try again later.
At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Synalloy Corporation (NASDAQ:SYNL).
Synalloy Corporation (NASDAQ:SYNL) investors should be aware of a decrease in hedge fund interest recently. Synalloy Corporation (NASDAQ:SYNL) was in 5 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. Our calculations also showed that SYNL 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.
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 S&P 500 ETFs by more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Gavin Saitowitz of Prelude 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. Keeping this in mind we're going to go over the key hedge fund action surrounding Synalloy Corporation (NASDAQ:SYNL).
How have hedgies been trading Synalloy Corporation (NASDAQ:SYNL)?
At third quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in SYNL over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Synalloy Corporation (NASDAQ:SYNL) was held by Royce & Associates, which reported holding $5.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.6 million position. Other investors bullish on the company included Minerva Advisors, Fondren Management, and Springbok Capital. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to Synalloy Corporation (NASDAQ:SYNL), around 1.19% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, earmarking 0.21 percent of its 13F equity portfolio to SYNL.
Due to the fact that Synalloy Corporation (NASDAQ:SYNL) has witnessed a decline in interest from the smart money, we can see that there were a few hedgies that elected to cut their full holdings in the third quarter. Interestingly, Israel Englander's Millennium Management dumped the largest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $0.1 million in stock. Donald Sussman's fund, Paloma Partners, also sold off its stock, about $0.1 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Synalloy Corporation (NASDAQ:SYNL) but similarly valued. We will take a look at Seelos Therapeutics, Inc. (NASDAQ:SEEL), JMP Group LLC (NYSE:JMP), Recro Pharma Inc (NASDAQ:REPH), HighPoint Resources Corporation (NYSE:HPR), Income Opportunity Realty Investors, Inc. (NYSE:IOR), Streamline Health Solutions Inc. (NASDAQ:STRM), and Natural Alternatives International, Inc. (NASDAQ:NAII). This group of stocks' market values are closest to SYNL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEEL,4,757,2 JMP,2,87,0 REPH,13,14050,-1 HPR,8,2827,-7 IOR,1,325,1 STRM,6,18128,1 NAII,2,4323,1 Average,5.1,5785,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $6 million in SYNL's case. Recro Pharma Inc (NASDAQ:REPH) is the most popular stock in this table. On the other hand Income Opportunity Realty Investors, Inc. (NYSE:IOR) is the least popular one with only 1 bullish hedge fund positions. Synalloy Corporation (NASDAQ:SYNL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SYNL is 41.1. 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 negative signal and 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 November 27th and surpassed the market again by 16.1 percentage points. Unfortunately SYNL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SYNL investors were disappointed as the stock returned 6.9% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.
Get real-time email alerts: Follow Synalloy Corp (NASDAQ:SYNL)
Disclosure: None. This article was originally published at Insider Monkey.