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Hedge Funds Are Buying Synopsys, Inc. (SNPS)

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

Synopsys, Inc. (NASDAQ:SNPS) was in 30 hedge funds’ portfolios at the end of the third quarter of 2018. SNPS has experienced an increase in activity from the world’s largest hedge funds recently. There were 28 hedge funds in our database with SNPS positions at the end of the previous quarter. Our calculations also showed that SNPS isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

D. E. Shaw

We’re going to take a look at the key hedge fund action surrounding Synopsys, Inc. (NASDAQ:SNPS).

How have hedgies been trading Synopsys, Inc. (NASDAQ:SNPS)?

Heading into the fourth quarter of 2018, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SNPS over the last 13 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

SNPS_dec2018

The largest stake in Synopsys, Inc. (NASDAQ:SNPS) was held by Alkeon Capital Management, which reported holding $248.3 million worth of stock at the end of September. It was followed by D E Shaw with a $197.9 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Renaissance Technologies.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Egerton Capital Limited, managed by John Armitage, initiated the most valuable position in Synopsys, Inc. (NASDAQ:SNPS). Egerton Capital Limited had $100.8 million invested in the company at the end of the quarter. James Crichton’s Hitchwood Capital Management also made a $24.7 million investment in the stock during the quarter. The following funds were also among the new SNPS investors: Jeffrey Talpins’s Element Capital Management, John Osterweis’s Osterweis Capital Management, and Frederick DiSanto’s Ancora Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Synopsys, Inc. (NASDAQ:SNPS) but similarly valued. We will take a look at Genuine Parts Company (NYSE:GPC), Church & Dwight Co., Inc. (NYSE:CHD), TAL Education Group (NYSE:TAL), and Tapestry, Inc. (NYSE:TPR). This group of stocks’ market caps match SNPS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GPC 21 292208 5
CHD 20 182754 3
TAL 25 839473 -5
TPR 33 862676 8
Average 24.75 544278 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $544 million. That figure was $1.21 billion in SNPS’s case. Tapestry, Inc. (NYSE:TPR) is the most popular stock in this table. On the other hand Church & Dwight Co., Inc. (NYSE:CHD) is the least popular one with only 20 bullish hedge fund positions. Synopsys, Inc. (NASDAQ:SNPS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TPR might be a better candidate to consider a long position.

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

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