The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Synopsys, Inc. (NASDAQ:SNPS) based on those filings.
Is SNPS stock a buy or sell? Synopsys, Inc. (NASDAQ:SNPS) has experienced an increase in activity from the world’s largest hedge funds lately. Synopsys, Inc. (NASDAQ:SNPS) was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 45. Our calculations also showed that SNPS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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 leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 we’re going to review the new hedge fund action surrounding Synopsys, Inc. (NASDAQ:SNPS).
Do Hedge Funds Think SNPS Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the third quarter of 2020. By comparison, 45 hedge funds held shares or bullish call options in SNPS a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Alkeon Capital Management was the largest shareholder of Synopsys, Inc. (NASDAQ:SNPS), with a stake worth $703.8 million reported as of the end of December. Trailing Alkeon Capital Management was ARK Investment Management, which amassed a stake valued at $264.7 million. Citadel Investment Group, GLG Partners, and AQR Capital Management 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 Crestwood Capital Management allocated the biggest weight to Synopsys, Inc. (NASDAQ:SNPS), around 8.35% of its 13F portfolio. Fundsmith Long/Short Fund is also relatively very bullish on the stock, setting aside 4.82 percent of its 13F equity portfolio to SNPS.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in Synopsys, Inc. (NASDAQ:SNPS). Arrowstreet Capital had $67.1 million invested in the company at the end of the quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners also initiated a $20.4 million position during the quarter. The following funds were also among the new SNPS investors: Terry Smith’s Fundsmith Long/Short Fund, Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors.
Let’s now review 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 Amphenol Corporation (NYSE:APH), Digital Realty Trust, Inc. (NYSE:DLR), Chipotle Mexican Grill, Inc. (NYSE:CMG), BCE Inc. (NYSE:BCE), TC Energy Corporation (NYSE:TRP), Canadian Imperial Bank of Commerce (NYSE:CM), and Cadence Design Systems Inc (NASDAQ:CDNS). This group of stocks’ market values resemble SNPS’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $957 million. That figure was $1685 million in SNPS’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 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. Our overall hedge fund sentiment score for SNPS is 84.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately SNPS wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on SNPS were disappointed as the stock returned -12.1% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.