We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Synchronoss Technologies, Inc. (NASDAQ:SNCR).
Is Synchronoss Technologies, Inc. (NASDAQ:SNCR) the right investment to pursue these days? Investors who are in the know are becoming more confident. The number of long hedge fund positions improved by 3 in recent months. Our calculations also showed that SNCR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SNCR was in 11 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with SNCR holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the new hedge fund action regarding Synchronoss Technologies, Inc. (NASDAQ:SNCR).
How are hedge funds trading Synchronoss Technologies, Inc. (NASDAQ:SNCR)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SNCR over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Synchronoss Technologies, Inc. (NASDAQ:SNCR) was held by Archon Capital Management, which reported holding $13.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $7 million position. Other investors bullish on the company included Arrowstreet Capital, Emancipation Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Archon Capital Management allocated the biggest weight to Synchronoss Technologies, Inc. (NASDAQ:SNCR), around 3.2% of its 13F portfolio. Emancipation Capital is also relatively very bullish on the stock, earmarking 3.12 percent of its 13F equity portfolio to SNCR.
As one would reasonably expect, key money managers were breaking ground themselves. Emancipation Capital, managed by Charles Frumberg, created the largest call position in Synchronoss Technologies, Inc. (NASDAQ:SNCR). Emancipation Capital had $0.8 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new SNCR investors: Cliff Asness’s AQR Capital Management and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Synchronoss Technologies, Inc. (NASDAQ:SNCR) but similarly valued. These stocks are Parke Bancorp, Inc. (NASDAQ:PKBK), Silicom Ltd. (NASDAQ:SILC), iRadimed Corporation (NASDAQ:IRMD), and La Jolla Pharmaceutical Company (NASDAQ:LJPC). This group of stocks’ market caps are closest to SNCR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PKBK | 3 | 12970 | 1 |
| SILC | 6 | 10812 | 1 |
| IRMD | 9 | 14661 | 3 |
| LJPC | 13 | 79706 | 0 |
| Average | 7.75 | 29537 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $27 million in SNCR’s case. La Jolla Pharmaceutical Company (NASDAQ:LJPC) is the most popular stock in this table. On the other hand Parke Bancorp, Inc. (NASDAQ:PKBK) is the least popular one with only 3 bullish hedge fund positions. Synchronoss Technologies, Inc. (NASDAQ:SNCR) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SNCR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SNCR were disappointed as the stock returned -15.9% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
