Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Syneos Health, Inc. (NASDAQ:SYNH).
Syneos Health, Inc. (NASDAQ:SYNH) investors should be aware of a decrease in hedge fund interest recently. Our calculations also showed that SYNH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action regarding Syneos Health, Inc. (NASDAQ:SYNH).
Hedge fund activity in Syneos Health, Inc. (NASDAQ:SYNH)
Heading into the first quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SYNH over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cardinal Capital, managed by Amy Minella, holds the most valuable position in Syneos Health, Inc. (NASDAQ:SYNH). Cardinal Capital has a $47.6 million position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $31.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Alec Litowitz and Ross Laser’s Magnetar Capital, David Brown’s Hawk Ridge Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Hawk Ridge Management allocated the biggest weight to Syneos Health, Inc. (NASDAQ:SYNH), around 2.6% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, setting aside 1.45 percent of its 13F equity portfolio to SYNH.
Because Syneos Health, Inc. (NASDAQ:SYNH) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of funds who were dropping their full holdings last quarter. Interestingly, Andreas Halvorsen’s Viking Global dumped the biggest stake of the 750 funds monitored by Insider Monkey, valued at about $30.6 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund said goodbye to about $15 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Syneos Health, Inc. (NASDAQ:SYNH). These stocks are LATAM Airlines Group S.A. (NYSE:LTM), Sealed Air Corporation (NYSE:SEE), The Middleby Corporation (NASDAQ:MIDD), and Sabre Corporation (NASDAQ:SABR). This group of stocks’ market values are closest to SYNH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LTM | 14 | 33316 | 4 |
| SEE | 30 | 860935 | -4 |
| MIDD | 35 | 456204 | 10 |
| SABR | 24 | 204823 | -5 |
| Average | 25.75 | 388820 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $389 million. That figure was $185 million in SYNH’s case. The Middleby Corporation (NASDAQ:MIDD) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 14 bullish hedge fund positions. Syneos Health, Inc. (NASDAQ:SYNH) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately SYNH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SYNH investors were disappointed as the stock returned -27.8% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
