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Did Hedge Funds Make The Right Call On Syndax Pharmaceuticals, Inc. (SNDX) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) investors should pay attention to an increase in enthusiasm from smart money of late. Our calculations also showed that SNDX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

William Leland Edwards of Palo Alto Investors

William Leland Edwards of Palo Alto Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to review the new hedge fund action surrounding Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX).

What does smart money think about Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX)?

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 73% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SNDX over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is SNDX A Good Stock To Buy?

More specifically, Biotechnology Value Fund / BVF Inc was the largest shareholder of Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), with a stake worth $23.5 million reported as of the end of September. Trailing Biotechnology Value Fund / BVF Inc was Adage Capital Management, which amassed a stake valued at $11 million. Frazier Healthcare Partners, 683 Capital Partners, and Renaissance Technologies 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 Biotechnology Value Fund / BVF Inc allocated the biggest weight to Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), around 2.19% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, setting aside 1.23 percent of its 13F equity portfolio to SNDX.

Consequently, key hedge funds have been driving this bullishness. Frazier Healthcare Partners, managed by Alan Frazier, created the most valuable position in Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX). Frazier Healthcare Partners had $10.9 million invested in the company at the end of the quarter. Ken Greenberg and David Kim’s Ghost Tree Capital also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund, William Leland Edwards’s Palo Alto Investors, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks similar to Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX). These stocks are Puma Biotechnology Inc (NYSE:PBYI), Betterware de Mexico, S.A. de C.V. (NASDAQ:BWMX), AMC Entertainment Holdings Inc (NYSE:AMC), and Enerplus Corp (NYSE:ERF). This group of stocks’ market valuations are closest to SNDX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBYI 20 100494 3
BWMX 2 622 2
AMC 14 32247 -5
ERF 15 45932 -5
Average 12.75 44824 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $74 million in SNDX’s case. Puma Biotechnology Inc (NYSE:PBYI) is the most popular stock in this table. On the other hand Betterware de Mexico, S.A. de C.V. (NASDAQ:BWMX) is the least popular one with only 2 bullish hedge fund positions. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on SNDX, though not to the same extent, as the stock returned 28.4% since the end of March and outperformed the market as well.

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