Hedge Funds Are Buying Synacor Inc (SYNC)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Synacor Inc (NASDAQ:SYNC).

Synacor Inc (NASDAQ:SYNC) investors should pay attention to an increase in enthusiasm from smart money recently. SYNC was in 6 hedge funds’ portfolios at the end of September. There were 5 hedge funds in our database with SYNC holdings at the end of the previous quarter. Our calculations also showed that SYNC 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.

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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Jim Simons of Renaissance Technologies

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. Now we’re going to check out the key hedge fund action encompassing Synacor Inc (NASDAQ:SYNC).

How are hedge funds trading Synacor Inc (NASDAQ:SYNC)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in SYNC a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is SYNC A Good Stock To Buy?

The largest stake in Synacor Inc (NASDAQ:SYNC) was held by Renaissance Technologies, which reported holding $2.4 million worth of stock at the end of September. It was followed by Ariel Investments with a $2.2 million position. Other investors bullish on the company included Fondren Management, Emancipation Capital, and Ancora Advisors. In terms of the portfolio weights assigned to each position Emancipation Capital allocated the biggest weight to Synacor Inc (NASDAQ:SYNC), around 4.9% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, earmarking 1.22 percent of its 13F equity portfolio to SYNC.

Consequently, key hedge funds have jumped into Synacor Inc (NASDAQ:SYNC) headfirst. Fondren Management, managed by Bradley Louis Radoff, initiated the most outsized position in Synacor Inc (NASDAQ:SYNC). Fondren Management had $1.5 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0 million position during the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Synacor Inc (NASDAQ:SYNC) but similarly valued. We will take a look at Dawson Geophysical Company (NASDAQ:DWSN), Elmira Savings Bank NY (The) (NASDAQ:ESBK), Ever-Glory International Group, Inc. (NASDAQ:EVK), and Kingsway Financial Services Inc. (NYSE:KFS). This group of stocks’ market values match SYNC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DWSN 8 5741 0
ESBK 1 367 0
EVK 1 52 0
KFS 2 837 0
Average 3 1749 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $8 million in SYNC’s case. Dawson Geophysical Company (NASDAQ:DWSN) is the most popular stock in this table. On the other hand Elmira Savings Bank NY (The) (NASDAQ:ESBK) is the least popular one with only 1 bullish hedge fund positions. Synacor Inc (NASDAQ:SYNC) 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 SYNC as the stock returned 26.4% 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.