How Synchrony Financial (SYF) Stacks Up Against Its Peers

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment towards Synchrony Financial (NYSE:SYF).

Is Synchrony Financial (NYSE:SYF) an excellent stock to buy now? Hedge funds are taking a bearish view, as the number of bullish hedge fund positions dropped by 12 recently. At the end of this article we will also compare SYF to other stocks, including Apache Corporation (NYSE:APA), Williams Partners L.P. (NYSE:WPZ), and Southern Copper Corp (NYSE:SCCO) 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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With all of this in mind, let’s view the latest action encompassing Synchrony Financial (NYSE:SYF).

Hedge fund activity in Synchrony Financial (NYSE:SYF)

Heading into the fourth quarter of 2016, 48 investors from the Insider Monkey database were long Synchrony Financial (NYSE:SYF), down by 20% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Levin Capital Strategies, managed by John A. Levin, holds the biggest position in Synchrony Financial (NYSE:SYF). Levin Capital Strategies has a $1.05 billion position in the stock, comprising 15.5% of its 13F portfolio. Coming in second is Seth Klarman’s Baupost Group, with a $491.8 million position; the fund has 7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Doug Silverman and Alexander Klabin’s Senator Investment Group, Matthew Halbower’s Pentwater Capital Management, and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Since Synchrony Financial (NYSE:SYF) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of fund managers who were dropping their entire stakes by the end of the third quarter. Interestingly, Jean-Marie Eveillard’s First Eagle Investment Management said goodbye to the biggest position of the 700 funds tracked by Insider Monkey, totaling about $410.8 million in stock. Barry Rosenstein’s fund, JANA Partners, also cut its stock, about $111 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 12 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Synchrony Financial (NYSE:SYF). We will take a look at Apache Corporation (NYSE:APA), Williams Partners L.P. (NYSE:WPZ), Southern Copper Corp (NYSE:SCCO), and ConAgra Foods, Inc. (NYSE:CAG). This group of stocks’ market values match SYF’s market value.

As you can see these stocks had an average of 27 funds with long positions at the end of September and the average amount invested in these stocks was $1.16 billion. That figure was $4.02 billion in SYF’s case. ConAgra Foods, Inc. (NYSE:CAG) is the most popular stock in this table with 50 funds reporting ownership. On the other hand Williams Partners L.P. (NYSE:WPZ) is the least popular one with only 11 bullish hedge fund positions. Synchrony Financial (NYSE:SYF) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ConAgra Foods, Inc. (NYSE:CAG) might be a better candidate to consider a long position.

Disclosure: None