Hedge Funds Are Betting On Synopsys, Inc. (SNPS)

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.

Is Synopsys, Inc. (NASDAQ:SNPS) going to take off soon? Investors who are in the know are becoming more confident. The number of long hedge fund bets advanced by 1 recently. SNPS was in 22 hedge funds’ portfolios at the end of the third quarter of 2016. There were 21 hedge funds in our database with SNPS holdings at the end of the previous quarter. At the end of this article we will also compare SNPS to other stocks including Harley-Davidson, Inc. (NYSE:HOG), Regency Centers Corp (NYSE:REG), and Coca-Cola Enterprises Inc (NYSE:CCE) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s take a glance at the new action surrounding Synopsys, Inc. (NASDAQ:SNPS).

Hedge fund activity in Synopsys, Inc. (NASDAQ:SNPS)

Heading into the fourth quarter of 2016, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 5% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Panayotis Takis Sparaggis’s Alkeon Capital Management has the number one position in Synopsys, Inc. (NASDAQ:SNPS), worth close to $199.5 million, corresponding to 3.8% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $94.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Israel Englander’s Millennium Management, Ken Fisher’s Fisher Asset Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Consequently, key money managers have jumped into Synopsys, Inc. (NASDAQ:SNPS) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in Synopsys, Inc. (NASDAQ:SNPS). According to regulatory filings, the fund had $22.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $8.1 million position during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, Alec Litowitz and Ross Laser’s Magnetar Capital, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Synopsys, Inc. (NASDAQ:SNPS). These stocks are Harley-Davidson, Inc. (NYSE:HOG), Regency Centers Corp (NYSE:REG), Coca-Cola Enterprises Inc (NYSE:CCE), and Aramark (NYSE:ARMK). This group of stocks’ market values resemble SNPS’s market value.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $689 million. That figure was $417 million in SNPS’s case. Coca-Cola Enterprises Inc (NYSE:CCE) is the most popular stock in this table. On the other hand Regency Centers Corp (NYSE:REG) is the least popular one with only 11 bullish hedge fund positions. Synopsys, Inc. (NASDAQ:SNPS) 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. In this regard CCE might be a better candidate to consider a long position.

Disclosure: none.