In this article we are going to use hedge fund sentiment as a tool and determine whether Synchronoss Technologies, Inc. (NASDAQ:SNCR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is SNCR a good stock to buy now? Hedge fund interest in Synchronoss Technologies, Inc. (NASDAQ:SNCR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SNCR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Shore Bancshares, Inc. (NASDAQ:SHBI), Surgalign Holdings, Inc. (NASDAQ:SRGA), and Strongbridge Biopharma plc (NASDAQ:SBBP) to gather more data points.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let’s view the key hedge fund action encompassing Synchronoss Technologies, Inc. (NASDAQ:SNCR).
Do Hedge Funds Think SNCR Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in SNCR a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Archon Capital Management, managed by Constantinos J. Christofilis, holds the biggest position in Synchronoss Technologies, Inc. (NASDAQ:SNCR). Archon Capital Management has a $2.6 million position in the stock, comprising 0.5% of its 13F portfolio. Coming in second is Renaissance Technologies, which holds a $1.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Archon Capital Management allocated the biggest weight to Synchronoss Technologies, Inc. (NASDAQ:SNCR), around 0.53% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.07 percent of its 13F equity portfolio to SNCR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Paloma Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).
Let’s go over hedge fund activity in other stocks similar to Synchronoss Technologies, Inc. (NASDAQ:SNCR). We will take a look at Shore Bancshares, Inc. (NASDAQ:SHBI), Surgalign Holdings, Inc. (NASDAQ:SRGA), Strongbridge Biopharma plc (NASDAQ:SBBP), Tanzanian Gold Corporation (NYSE:TRX), Fonar Corporation (NASDAQ:FONR), BELLUS Health Inc. (NASDAQ:BLU), and Exagen Inc. (NASDAQ:XGN). All of these stocks’ market caps are similar to SNCR’s market cap.
|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 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $7 million in SNCR’s case. Surgalign Holdings, Inc. (NASDAQ:SRGA) is the most popular stock in this table. On the other hand Exagen Inc. (NASDAQ:XGN) is the least popular one with only 1 bullish hedge fund positions. Synchronoss Technologies, Inc. (NASDAQ:SNCR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNCR is 67.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately SNCR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SNCR were disappointed as the stock returned -0.3% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.