Hedge Funds Are Buying Synopsys, Inc. (SNPS)

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Synopsys, Inc. (NASDAQ:SNPS).

Synopsys, Inc. (NASDAQ:SNPS) investors should pay attention to an increase in support from the world’s most elite money managers lately. Synopsys, Inc. (NASDAQ:SNPS) was in 41 hedge funds’ portfolios at the end of June. The all time high for this statistic is 45. There were 34 hedge funds in our database with SNPS holdings at the end of March. Our calculations also showed that SNPS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Blood of Generation Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a gander at the new hedge fund action surrounding Synopsys, Inc. (NASDAQ:SNPS).

Do Hedge Funds Think SNPS Is A Good Stock To Buy Now?

At Q2’s end, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in SNPS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Alkeon Capital Management held the most valuable stake in Synopsys, Inc. (NASDAQ:SNPS), which was worth $746.7 million at the end of the second quarter. On the second spot was Generation Investment Management which amassed $343.7 million worth of shares. AQR Capital Management, GLG Partners, and Arrowstreet Capital 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 Crestwood Capital Management allocated the biggest weight to Synopsys, Inc. (NASDAQ:SNPS), around 6.1% of its 13F portfolio. Kerrisdale Capital is also relatively very bullish on the stock, dishing out 3.01 percent of its 13F equity portfolio to SNPS.

Now, some big names have been driving this bullishness. Generation Investment Management, managed by David Blood and Al Gore, assembled the most outsized position in Synopsys, Inc. (NASDAQ:SNPS). Generation Investment Management had $343.7 million invested in the company at the end of the quarter. James Dinan’s York Capital Management also initiated a $25.8 million position during the quarter. The other funds with brand new SNPS positions are Chris Rokos’s Rokos Capital Management, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Crispin Odey’s Odey Asset Management Group.

Let’s check out hedge fund activity in other stocks similar to Synopsys, Inc. (NASDAQ:SNPS). These stocks are Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), DexCom, Inc. (NASDAQ:DXCM), Kinder Morgan Inc (NYSE:KMI), DuPont de Nemours Inc (NYSE:DD), Electronic Arts Inc. (NASDAQ:EA), and American International Group Inc (NYSE:AIG). All of these stocks’ market caps match SNPS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1370 million. That figure was $2057 million in SNPS’s case. DuPont de Nemours Inc (NYSE:DD) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 9 bullish hedge fund positions. Synopsys, Inc. (NASDAQ:SNPS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNPS is 70.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on SNPS as the stock returned 4.7% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Suggested Articles:

• 15 Largest Utility Companies In The World
• Chris Hohn’s Top 10 Stock Picks
• 15 Best Luxury Hotels in the World

Disclosure: None. This article was originally published at Insider Monkey.