Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Synchrony Financial (NYSE:SYF) has seen an increase in hedge fund sentiment recently. At the end of this article we will also compare SYF to other stocks including American Airlines Group Inc (NASDAQ:AAL), IntercontinentalExchange Inc (NYSE:ICE), and PG&E Corporation (NYSE:PCG) to get a better sense of its popularity.
Follow Synchrony Financial (NYSE:SYF)
Follow Synchrony Financial (NYSE:SYF)
If you’d ask most market participants, hedge funds are seen as underperforming, old investment vehicles of the years past. While there are more than 8000 funds with their doors open today, we hone in on the bigwigs of this group, around 700 funds. It is estimated that this group of investors orchestrate most of all hedge funds’ total asset base, and by watching their best picks, Insider Monkey has revealed numerous investment strategies that have historically outpaced Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, let’s check out the fresh action regarding Synchrony Financial (NYSE:SYF).
How have hedgies been trading Synchrony Financial (NYSE:SYF)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 62% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Pentwater Capital Management, managed by Matthew Halbower, holds the biggest position in Synchrony Financial (NYSE:SYF). Pentwater Capital Management has a $95.5 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $42.8 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish consist of Glenn Russell Dubin’s Highbridge Capital Management, Daniel S. Och’s OZ Management and Anand Parekh’s Alyeska Investment Group.
As one would reasonably expect, key money managers have been driving this bullishness. Highbridge Capital Management assembled the largest position in Synchrony Financial (NYSE:SYF). Highbridge Capital Management had $31.3 million invested in the company at the end of the quarter. Robert Henry Lynch’s Aristeia Capital also made a $7.8 million investment in the stock during the quarter. The other funds with brand new SYF positions are Jim Simons’s Renaissance Technologies, George Hall’s Clinton Group, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Synchrony Financial (NYSE:SYF) but similarly valued. These stocks are American Airlines Group Inc (NASDAQ:AAL), IntercontinentalExchange Inc (NYSE:ICE), PG&E Corporation (NYSE:PCG), and Exelon Corporation (NYSE:EXC). All of these stocks’ market caps are closest to SYF’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AAL | 77 | 1824096 | -8 |
| ICE | 38 | 2017380 | -5 |
| PCG | 20 | 547876 | -2 |
| EXC | 40 | 954812 | 10 |
As you can see these stocks had an average of 43.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.34 billion, significantly higher than the $292 million figure in SYF’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand PG&E Corporation (NYSE:PCG) is the least popular one with only 20 bullish hedge fund positions. Synchrony Financial (NYSE:SYF) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AAL might be a better candidate to consider for a long bet.
