You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Syros Pharmaceuticals Inc (NASDAQ:SYRS) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. SYRS was in 7 hedge funds’ portfolios at the end of the third quarter of 2016. There were 6 hedge funds in our database with SYRS holdings at the end of the second quarter. 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 Seadrill Partners LLC (NYSE:SDLP), American Software, Inc. (NASDAQ:AMSWA), and Enova International Inc (NYSE:ENVA) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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What does the smart money think about Syros Pharmaceuticals Inc (NASDAQ:SYRS)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 17% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards SYRS over the last 2 quarters since its end-of-June IPO. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, James E. Flynn’s Deerfield Management has the largest position in Syros Pharmaceuticals Inc (NASDAQ:SYRS), worth close to $25.1 million, accounting for 1.2% of its total 13F portfolio. The second most bullish fund manager is Jeremy Green of Redmile Group, with an $11.7 million position. Other hedge funds and institutional investors with similar optimism comprise Dennis Purcell’s Aisling Capital, Julian Baker and Felix Baker’s Baker Bros. Advisors, and Anand Parekh’s Alyeska Investment Group. 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-micro-cap stocks.
As industry-wide interest jumped, key money managers have jumped into Syros Pharmaceuticals Inc (NASDAQ:SYRS) headfirst. EcoR1 Capital, led by Oleg Nodelman, assembled the most outsized position in Syros Pharmaceuticals Inc (NASDAQ:SYRS). EcoR1 Capital had $0.9 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 Syros Pharmaceuticals Inc (NASDAQ:SYRS). We will take a look at Seadrill Partners LLC (NYSE:SDLP), American Software, Inc. (NASDAQ:AMSWA), Enova International Inc (NYSE:ENVA), and Monster Worldwide, Inc. (NYSE:MWW). All of these stocks’ market caps resemble SYRS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SDLP | 7 | 1670 | 0 |
| AMSWA | 5 | 23513 | 1 |
| ENVA | 21 | 74736 | 3 |
| MWW | 20 | 50220 | 1 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $50 million in SYRS’s case. Enova International Inc (NYSE:ENVA) is the most popular stock in this table. On the other hand American Software, Inc. (NASDAQ:AMSWA) is the least popular one with only 5 bullish hedge fund positions. Syros Pharmaceuticals Inc (NASDAQ:SYRS) 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 ENVA might be a better candidate to consider taking a long position in.
Disclosure: None
