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). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 second quarter and determine whether the smart money was really smart about this stock.
Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) has experienced an increase in support from the world’s most elite money managers in recent months. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) was in 24 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 19 hedge funds in our database with SNDX positions at the end of the first quarter. Our calculations also showed that SNDX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a look at the new hedge fund action encompassing Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX).
How have hedgies been trading Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX)?
At the end of June, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the previous quarter. By comparison, 8 hedge funds held shares or bullish call options in SNDX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Biotechnology Value Fund / BVF Inc held the most valuable stake in Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), which was worth $36.6 million at the end of the third quarter. On the second spot was Frazier Healthcare Partners which amassed $19.6 million worth of shares. OrbiMed Advisors, Adage Capital Management, and Citadel Investment Group 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 2.26% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, designating 1.72 percent of its 13F equity portfolio to SNDX.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. RA Capital Management, managed by Peter Kolchinsky, established the most outsized position in Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX). RA Capital Management had $15.2 million invested in the company at the end of the quarter. Nathan Fischel’s DAFNA Capital Management also initiated a $5.3 million position during the quarter. The other funds with new positions in the stock are Manfred Yu’s Acuta Capital Partners, Sander Gerber’s Hudson Bay Capital Management, and Richard Driehaus’s Driehaus Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) but similarly valued. These stocks are LeMaitre Vascular Inc (NASDAQ:LMAT), MYR Group Inc (NASDAQ:MYRG), UMH Properties, Inc (NYSE:UMH), Pacific Biosciences of California, Inc. (NASDAQ:PACB), Merchants Bancorp (NASDAQ:MBIN), Co-Diagnostics, Inc. (NASDAQ:CODX), and Capstead Mortgage Corporation (NYSE:CMO). This group of stocks’ market values match SNDX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $175 million in SNDX’s case. Pacific Biosciences of California, Inc. (NASDAQ:PACB) is the most popular stock in this table. On the other hand Co-Diagnostics, Inc. (NASDAQ:CODX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is more popular among hedge funds. Our overall hedge fund sentiment score for SNDX is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately SNDX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SNDX were disappointed as the stock returned -6.2% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.