Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Syros Pharmaceuticals, Inc. (NASDAQ:SYRS)? The smart money sentiment can provide an answer to this question.
Is Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) a healthy stock for your portfolio? The smart money was in a bearish mood. The number of bullish hedge fund positions were cut by 2 lately. Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 20. Our calculations also showed that SYRS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 20 hedge funds in our database with SYRS holdings at the end of December.
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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Oleg Nodelman of EcoR1 Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 let’s review the new hedge fund action surrounding Syros Pharmaceuticals, Inc. (NASDAQ:SYRS).
Do Hedge Funds Think SYRS Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in SYRS over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, ARK Investment Management held the most valuable stake in Syros Pharmaceuticals, Inc. (NASDAQ:SYRS), which was worth $57.7 million at the end of the fourth quarter. On the second spot was Samsara BioCapital which amassed $14.8 million worth of shares. OrbiMed Advisors, EcoR1 Capital, and RA Capital Management 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 Samsara BioCapital allocated the biggest weight to Syros Pharmaceuticals, Inc. (NASDAQ:SYRS), around 2.72% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, designating 0.33 percent of its 13F equity portfolio to SYRS.
Because Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) has experienced falling interest from the aggregate hedge fund industry, logic holds that there were a few funds that decided to sell off their positions entirely last quarter. It’s worth mentioning that George McCabe’s Portolan Capital Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, comprising close to $4.1 million in stock, and Renaissance Technologies was right behind this move, as the fund said goodbye to about $0.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Syros Pharmaceuticals, Inc. (NASDAQ:SYRS). These stocks are Nesco Holdings, Inc. (NYSE:NSCO), Accuray Incorporated (NASDAQ:ARAY), XOMA Corp (NASDAQ:XOMA), Yunji Inc. (NASDAQ:YJ), Seneca Foods Corp. (NASDAQ:SENEB), VOXX International Corp (NASDAQ:VOXX), and Bridgewater Bancshares, Inc. (NASDAQ:BWB). All of these stocks’ market caps are similar to SYRS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NSCO | 10 | 32769 | -3 |
| ARAY | 17 | 90188 | 0 |
| XOMA | 5 | 169665 | -5 |
| YJ | 3 | 388 | -1 |
| SENEB | 2 | 2272 | 0 |
| VOXX | 11 | 63528 | 3 |
| BWB | 7 | 14728 | 0 |
| Average | 7.9 | 53363 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.9 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $120 million in SYRS’s case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand Seneca Foods Corp. (NASDAQ:SENEB) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) is more popular among hedge funds. Our overall hedge fund sentiment score for SYRS is 80. 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately SYRS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SYRS were disappointed as the stock returned -37.3% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
