The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Synta Pharmaceuticals Corp. (NASDAQ:SNTA) from the perspective of those elite funds.
Synta Pharmaceuticals Corp. (NASDAQ:SNTA) investors should be aware of a decrease in hedge fund interest lately. 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 Casella Waste Systems Inc. (NASDAQ:CWST), KEYW Holding Corp. (NASDAQ:KEYW), and Limoneira Company (NASDAQ:LMNR) to gather more data points.
According to most market participants, hedge funds are assumed to be unimportant, outdated investment vehicles of years past. While there are more than 8000 funds in operation today, we choose to focus on the moguls of this club, approximately 700 funds. These hedge fund managers direct the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their top equity investments, Insider Monkey has deciphered various investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Now, let’s take a look at the key action regarding Synta Pharmaceuticals Corp. (NASDAQ:SNTA).
How have hedgies been trading Synta Pharmaceuticals Corp. (NASDAQ:SNTA)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 13% from the previous quarter. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Steven Boyd’s Armistice Capital had the biggest position in Synta Pharmaceuticals Corp. (NASDAQ:SNTA), worth close to $3.5 million, comprising 1.2% of its total 13F portfolio. Sitting at the No. 2 spot is quant shop D E Shaw, with a $0.5 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions comprise Israel Englander’s Millennium Management, Chao Ku’s Nine Chapters Capital Management and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Synta Pharmaceuticals Corp. (NASDAQ:SNTA) has experienced a declination in interest from the smart money, it’s easy to see that there exists a select few funds that decided to sell off their full holdings at the end of the third quarter. Interestingly, Highbridge Capital Management said goodbye to the biggest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $0.1 million in stock. It isn’t a huge amount but it isn’t a positive signal either.
Let’s also review hedge fund activity in other stocks similar to Synta Pharmaceuticals Corp. (NASDAQ:SNTA). We will take a look at Casella Waste Systems Inc. (NASDAQ:CWST), KEYW Holding Corp. (NASDAQ:KEYW), Limoneira Company (NASDAQ:LMNR), and NVE Corporation (NASDAQ:NVEC). This group of stocks’ market valuations are closest to Synta Pharmaceuticals Corp. (NASDAQ:SNTA)’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. Casella Waste Systems Inc. (NASDAQ:CWST) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Synta Pharmaceuticals Corp. (NASDAQ:SNTA) is even less popular than Limoneira Company (NASDAQ:LMNR). Considering that hedge funds aren’t fond of this stock, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.