Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Synovus Financial Corp. (NYSE:SNV).
Hedge fund interest in Synovus Financial Corp. (NYSE:SNV) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Healthequity Inc (NASDAQ:HQY), CarGurus, Inc. (NASDAQ:CARG), and Sterling Bancorp (NYSE:STL) to gather more data points.
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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s review the recent hedge fund action surrounding Synovus Financial Corp. (NYSE:SNV).
What does the smart money think about Synovus Financial Corp. (NYSE:SNV)?
At Q4’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SNV over the last 14 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Synovus Financial Corp. (NYSE:SNV) was held by Citadel Investment Group, which reported holding $137 million worth of stock at the end of September. It was followed by Millennium Management with a $98.9 million position. Other investors bullish on the company included EJF Capital, Azora Capital, and Two Sigma Advisors.
Because Synovus Financial Corp. (NYSE:SNV) has witnessed falling interest from the smart money, it’s safe to say that there is a sect of funds who were dropping their positions entirely in the third quarter. Interestingly, Clint Carlson’s Carlson Capital dumped the largest position of all the hedgies monitored by Insider Monkey, comprising about $25.8 million in stock. Glenn Russell Dubin’s fund, Highbridge Capital Management, also cut its stock, about $12.6 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Synovus Financial Corp. (NYSE:SNV) but similarly valued. We will take a look at Healthequity Inc (NASDAQ:HQY), CarGurus, Inc. (NASDAQ:CARG), Sterling Bancorp (NYSE:STL), and Pebblebrook Hotel Trust (NYSE:PEB). This group of stocks’ market caps are similar to SNV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HQY | 18 | 65346 | 3 |
| CARG | 19 | 630327 | 2 |
| STL | 18 | 445056 | -3 |
| PEB | 12 | 79370 | 1 |
| Average | 16.75 | 305025 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $305 million. That figure was $689 million in SNV’s case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Synovus Financial Corp. (NYSE:SNV) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SNV wasn’t nearly as popular as these 15 stock and hedge funds that were betting on SNV were disappointed as the stock returned 12.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
