Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Synlogic, Inc. (NASDAQ:SYBX).
Hedge fund interest in Synlogic, Inc. (NASDAQ:SYBX) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Southern First Bancshares, Inc. (NASDAQ:SFST), Sientra Inc (NASDAQ:SIEN), and Preformed Line Products Company (NASDAQ:PLPC) to gather more data points. Our calculations also showed that SYBX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are viewed as worthless, old investment tools of yesteryear. While there are greater than 8000 funds in operation at present, Our experts choose to focus on the bigwigs of this group, approximately 750 funds. Most estimates calculate that this group of people control most of the hedge fund industry's total capital, and by observing their finest picks, Insider Monkey has determined various investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's take a glance at the key hedge fund action regarding Synlogic, Inc. (NASDAQ:SYBX).
Hedge fund activity in Synlogic, Inc. (NASDAQ:SYBX)
At Q2's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in SYBX a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, OrbiMed Advisors was the largest shareholder of Synlogic, Inc. (NASDAQ:SYBX), with a stake worth $18.5 million reported as of the end of March. Trailing OrbiMed Advisors was Deerfield Management, which amassed a stake valued at $10.1 million. Aquilo Capital Management, Perceptive Advisors, and Frazier Healthcare Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the second quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Synlogic, Inc. (NASDAQ:SYBX) but similarly valued. These stocks are Southern First Bancshares, Inc. (NASDAQ:SFST), Sientra Inc (NASDAQ:SIEN), Preformed Line Products Company (NASDAQ:PLPC), and Century Casinos, Inc. (NASDAQ:CNTY). All of these stocks' market caps are similar to SYBX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFST,7,38113,0 SIEN,19,100867,5 PLPC,5,30712,-2 CNTY,10,60108,4 Average,10.25,57450,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $54 million in SYBX's case. Sientra Inc (NASDAQ:SIEN) is the most popular stock in this table. On the other hand Preformed Line Products Company (NASDAQ:PLPC) is the least popular one with only 5 bullish hedge fund positions. Synlogic, Inc. (NASDAQ:SYBX) is not the least popular stock in this group but hedge fund interest is still below average. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately SYBX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SYBX investors were disappointed as the stock returned -74.8% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.