Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Synchronoss Technologies, Inc. (NASDAQ:SNCR).
Synchronoss Technologies, Inc. (NASDAQ:SNCR) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 8 hedge funds' portfolios at the end of the first quarter of 2020. At the end of this article we will also compare SNCR to other stocks including Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), Select Bancorp, Inc. (NASDAQ:SLCT), and Liquidia Technologies, Inc. (NASDAQ:LQDA) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_673876" align="aligncenter" width="398"] John Overdeck of Two Sigma Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's check out the fresh hedge fund action surrounding Synchronoss Technologies, Inc. (NASDAQ:SNCR).
How are hedge funds trading Synchronoss Technologies, Inc. (NASDAQ:SNCR)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in SNCR a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, Archon Capital Management held the most valuable stake in Synchronoss Technologies, Inc. (NASDAQ:SNCR), which was worth $4.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $2.7 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and Citadel Investment Group 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 Archon Capital Management allocated the biggest weight to Synchronoss Technologies, Inc. (NASDAQ:SNCR), around 1.54% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, designating 0.004 percent of its 13F equity portfolio to SNCR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Emancipation Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Engineers Gate Manager).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Synchronoss Technologies, Inc. (NASDAQ:SNCR) but similarly valued. We will take a look at Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), Select Bancorp, Inc. (NASDAQ:SLCT), Liquidia Technologies, Inc. (NASDAQ:LQDA), and Horizon Technology Finance Corp (NASDAQ:HRZN). All of these stocks' market caps are closest to SNCR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGLE,13,54859,1 SLCT,6,8927,1 LQDA,6,14895,-1 HRZN,3,2998,-1 Average,7,20420,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $9 million in SNCR's case. Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) is the most popular stock in this table. On the other hand Horizon Technology Finance Corp (NASDAQ:HRZN) is the least popular one with only 3 bullish hedge fund positions. Synchronoss Technologies, Inc. (NASDAQ:SNCR) is not the most popular stock in this group but hedge fund interest is still above average. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately SNCR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SNCR were disappointed as the stock returned -0.7% during the same time period 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 so far this year.
Disclosure: None. This article was originally published at Insider Monkey.