How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Synalloy Corporation (NASDAQ:SYNL).
Synalloy Corporation (NASDAQ:SYNL) was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. SYNL has experienced an increase in hedge fund sentiment of late. There were 3 hedge funds in our database with SYNL positions at the end of the previous quarter. Our calculations also showed that SYNL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the new hedge fund action regarding Synalloy Corporation (NASDAQ:SYNL).
What does smart money think about Synalloy Corporation (NASDAQ:SYNL)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in SYNL a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the number one position in Synalloy Corporation (NASDAQ:SYNL). Royce & Associates has a $16.2 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates’s heels is Renaissance Technologies, with a $2.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish consist of David P. Cohen’s Minerva Advisors, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital and . In terms of the portfolio weights assigned to each position Minerva Advisors allocated the biggest weight to Synalloy Corporation (NASDAQ:SYNL), around 0.72% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to SYNL.
As aggregate interest increased, key money managers have been driving this bullishness. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, established the most valuable position in Synalloy Corporation (NASDAQ:SYNL). Springbok Capital had $0 million invested in the company at the end of the quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Synalloy Corporation (NASDAQ:SYNL). We will take a look at AXT Inc (NASDAQ:AXTI), Five Prime Therapeutics Inc (NASDAQ:FPRX), Greenlane Holdings, Inc. (NASDAQ:GNLN), and Adamas Pharmaceuticals Inc (NASDAQ:ADMS). This group of stocks’ market caps resemble SYNL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AXTI | 8 | 12058 | 1 |
| FPRX | 18 | 41842 | -2 |
| GNLN | 6 | 9719 | 0 |
| ADMS | 10 | 8048 | 1 |
| Average | 10.5 | 17917 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $20 million in SYNL’s case. Five Prime Therapeutics Inc (NASDAQ:FPRX) is the most popular stock in this table. On the other hand Greenlane Holdings, Inc. (NASDAQ:GNLN) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Synalloy Corporation (NASDAQ:SYNL) is even less popular than GNLN. Hedge funds dodged a bullet by taking a bearish stance towards SYNL. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SYNL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SYNL investors were disappointed as the stock returned -18.9% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
