Should I Avoid Synopsys, Inc. (SNPS)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Synopsys, Inc. (NASDAQ:SNPS).

Synopsys, Inc. (NASDAQ:SNPS) shareholders have witnessed a decrease in hedge fund interest in recent months. Synopsys, Inc. (NASDAQ:SNPS) was in 34 hedge funds’ portfolios at the end of March. The all time high for this statistic is 45. There were 40 hedge funds in our database with SNPS holdings at the end of December. Our calculations also showed that SNPS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

If you’d ask most traders, hedge funds are perceived as slow, old financial tools of yesteryear. While there are more than 8000 funds with their doors open at present, We look at the crème de la crème of this group, approximately 850 funds. These hedge fund managers administer the lion’s share of all hedge funds’ total capital, and by watching their inimitable stock picks, Insider Monkey has uncovered several investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Synopsys, Inc. (NASDAQ:SNPS).

Do Hedge Funds Think SNPS Is A Good Stock To Buy Now?

At Q1’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SNPS over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Alkeon Capital Management held the most valuable stake in Synopsys, Inc. (NASDAQ:SNPS), which was worth $673.9 million at the end of the fourth quarter. On the second spot was ARK Investment Management which amassed $381 million worth of shares. AQR Capital Management, Arrowstreet Capital, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Crestwood Capital Management allocated the biggest weight to Synopsys, Inc. (NASDAQ:SNPS), around 5.37% of its 13F portfolio. Fundsmith Long/Short Fund is also relatively very bullish on the stock, setting aside 3.74 percent of its 13F equity portfolio to SNPS.

Seeing as Synopsys, Inc. (NASDAQ:SNPS) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds that slashed their positions entirely last quarter. Intriguingly, Robert Boucai’s Newbrook Capital Advisors said goodbye to the largest position of all the hedgies monitored by Insider Monkey, totaling close to $48.1 million in stock, and Principal Global Investors’s Columbus Circle Investors was right behind this move, as the fund sold off about $23.9 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Synopsys, Inc. (NASDAQ:SNPS) but similarly valued. These stocks are Kinder Morgan Inc (NYSE:KMI), General Mills, Inc. (NYSE:GIS), Simon Property Group, Inc (NYSE:SPG), Aptiv PLC (NYSE:APTV), Centene Corporation (NYSE:CNC), IQVIA Holdings, Inc. (NYSE:IQV), and CRH PLC (NYSE:CRH). This group of stocks’ market values match SNPS’s market value.

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As you can see these stocks had an average of 39.1 hedge funds with bullish positions and the average amount invested in these stocks was $1495 million. That figure was $1656 million in SNPS’s case. IQVIA Holdings, Inc. (NYSE:IQV) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 9 bullish hedge fund positions. Synopsys, Inc. (NASDAQ:SNPS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SNPS is 45.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on SNPS, though not to the same extent, as the stock returned 8.6% since the end of Q1 (through June 25th) and outperformed the market.

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Disclosure: None. This article was originally published at Insider Monkey.

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