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Hedge Funds Are Betting On Synaptics Incorporated (SYNA)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Synaptics Incorporated (NASDAQ:SYNA).

Synaptics Incorporated (NASDAQ:SYNA) has seen an increase in support from the world’s most elite money managers lately. Our calculations also showed that SYNA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the latest hedge fund action encompassing Synaptics Incorporated (NASDAQ:SYNA).

What does smart money think about Synaptics Incorporated (NASDAQ:SYNA)?

Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 46% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SYNA over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Synaptics Incorporated (NASDAQ:SYNA) was held by Lynrock Lake, which reported holding $111.4 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $71 million position. Other investors bullish on the company included Arrowstreet Capital, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Lynrock Lake allocated the biggest weight to Synaptics Incorporated (NASDAQ:SYNA), around 14.23% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, dishing out 0.84 percent of its 13F equity portfolio to SYNA.

As industrywide interest jumped, some big names have jumped into Synaptics Incorporated (NASDAQ:SYNA) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in Synaptics Incorporated (NASDAQ:SYNA). Arrowstreet Capital had $15.2 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $8.7 million position during the quarter. The following funds were also among the new SYNA investors: Cliff Asness’s AQR Capital Management, David Harding’s Winton Capital Management, and Hoon Kim’s Quantinno Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Synaptics Incorporated (NASDAQ:SYNA) but similarly valued. These stocks are Golar LNG Limited (NASDAQ:GLNG), BELLUS Health Inc. (NASDAQ:BLU), PBF Logistics LP (NYSE:PBFX), and Aphria Inc. (NYSE:APHA). This group of stocks’ market valuations match SYNA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLNG 24 249259 1
BLU 13 82956 13
PBFX 1 422 -2
APHA 5 2580 0
Average 10.75 83804 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $267 million in SYNA’s case. Golar LNG Limited (NASDAQ:GLNG) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 1 bullish hedge fund positions. Synaptics Incorporated (NASDAQ:SYNA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on SYNA as the stock returned 43.1% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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