It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like SYNNEX Corporation (NYSE:SNX).
SYNNEX Corporation (NYSE:SNX) was in 17 hedge funds’ portfolios at the end of September. SNX has seen an increase in hedge fund interest in recent months. There were 13 hedge funds in our database with SNX positions at the end of the previous quarter. Our calculations also showed that snx isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Let’s view the latest hedge fund action regarding SYNNEX Corporation (NYSE:SNX).
How have hedgies been trading SYNNEX Corporation (NYSE:SNX)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in SNX heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in SYNNEX Corporation (NYSE:SNX). AQR Capital Management has a $103.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $36.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions include Anand Parekh’s Alyeska Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.
As one would reasonably expect, key hedge funds have jumped into SYNNEX Corporation (NYSE:SNX) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in SYNNEX Corporation (NYSE:SNX). Marshall Wace LLP had $7.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $2.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Alec Litowitz and Ross Laser’s Magnetar Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as SYNNEX Corporation (NYSE:SNX) but similarly valued. We will take a look at NCR Corporation (NYSE:NCR), Trinseo S.A. (NYSE:TSE), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and McDermott International, Inc. (NYSE:MDR). All of these stocks’ market caps resemble SNX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NCR | 17 | 123213 | 1 |
| TSE | 18 | 208871 | 1 |
| CSOD | 28 | 784531 | 7 |
| MDR | 24 | 322643 | 2 |
| Average | 21.75 | 359815 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $360 million. That figure was $205 million in SNX’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand NCR Corporation (NYSE:NCR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks SYNNEX Corporation (NYSE:SNX) is even less popular than NCR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
