Is Synta Pharmaceuticals Corp. (NASDAQ:SNTA) the right pick for your portfolio? The smart money is buying. The number of long hedge fund bets improved by 2 lately.
In the eyes of most investors, hedge funds are assumed to be underperforming, old financial vehicles of years past. While there are over 8000 funds in operation at the moment, we at Insider Monkey hone in on the masters of this club, about 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds' total capital, and by tracking their top picks, we have brought to light a few investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Just as key, positive insider trading activity is a second way to parse down the stock market universe. As the old adage goes: there are a number of reasons for an insider to sell shares of his or her company, but only one, very clear reason why they would buy. Many empirical studies have demonstrated the market-beating potential of this tactic if shareholders know what to do (learn more here).
Consequently, we're going to take a glance at the key action encompassing Synta Pharmaceuticals Corp. (NASDAQ:SNTA).
At the end of the first quarter, a total of 14 of the hedge funds we track were bullish in this stock, a change of 17% from the first quarter. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably.
Of the funds we track, Julian Baker and Felix Baker's Baker Bros. Advisors had the largest position in Synta Pharmaceuticals Corp. (NASDAQ:SNTA), worth close to $12.6 million, comprising 0.3% of its total 13F portfolio. Coming in second is Daniel Gold of QVT Financial, with a $11.5 million position; 0.8% of its 13F portfolio is allocated to the stock. Remaining hedgies that hold long positions include Joseph Edelman's Perceptive Advisors, Mark Broach's Manatuck Hill Partners and Richard Driehaus's Driehaus Capital.
As one would reasonably expect, key hedge funds have been driving this bullishness. Scoggin, managed by Curtis Schenker and Craig Effron, initiated the largest call position in Synta Pharmaceuticals Corp. (NASDAQ:SNTA). Scoggin had 3.3 million invested in the company at the end of the quarter. Steven Cohen's SAC Capital Advisors also initiated a $2.2 million position during the quarter. The following funds were also among the new SNTA investors: Curtis Schenker and Craig Effron's Scoggin, Jim Simons's Renaissance Technologies, and Louis Bacon's Moore Global Investments.
Bullish insider trading is best served when the company we're looking at has seen transactions within the past six months. Over the last 180-day time frame, Synta Pharmaceuticals Corp. (NASDAQ:SNTA) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let's go over hedge fund and insider activity in other stocks similar to Synta Pharmaceuticals Corp. (NASDAQ:SNTA). These stocks are Trinity Biotech plc (ADR) (NASDAQ:TRIB), Meridian Bioscience, Inc. (NASDAQ:VIVO), SurModics, Inc. (NASDAQ:SRDX), Quidel Corporation (NASDAQ:QDEL), and AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG). All of these stocks are in the diagnostic substances industry and their market caps are closest to SNTA's market cap.