We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Synchrony Financial (NYSE:SYF).
Is SYF a good stock to buy now? Synchrony Financial (NYSE:SYF) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 46 hedge funds’ portfolios at the end of September. Our calculations also showed that SYF 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). At the end of this article we will also compare SYF to other stocks including XPeng Inc. (NYSE:XPEV), DISH Network Corp. (NASDAQ:DISH), and Broadridge Financial Solutions, Inc. (NYSE:BR) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely 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 cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now let’s take a look at the fresh hedge fund action surrounding Synchrony Financial (NYSE:SYF).
Do Hedge Funds Think SYF Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 49 hedge funds with a bullish position in SYF 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, Warren Buffett’s Berkshire Hathaway has the biggest position in Synchrony Financial (NYSE:SYF), worth close to $526.8 million, accounting for 0.2% of its total 13F portfolio. The second most bullish fund manager is John Smith Clark of Southpoint Capital Advisors, with a $274.8 million position; 6.3% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions consist of Paul Reeder and Edward Shapiro’s PAR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Scott Ferguson’s Sachem Head Capital. In terms of the portfolio weights assigned to each position PAR Capital Management allocated the biggest weight to Synchrony Financial (NYSE:SYF), around 6.52% of its 13F portfolio. HG Vora Capital Management is also relatively very bullish on the stock, dishing out 6.41 percent of its 13F equity portfolio to SYF.
Since Synchrony Financial (NYSE:SYF) has faced bearish sentiment from the smart money, we can see that there is a sect of hedge funds who sold off their full holdings in the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of the 750 funds tracked by Insider Monkey, worth close to $21.9 million in stock. Brian J. Higgins’s fund, King Street Capital, also dropped its stock, about $19.9 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Synchrony Financial (NYSE:SYF) but similarly valued. These stocks are XPeng Inc. (NYSE:XPEV), DISH Network Corp. (NASDAQ:DISH), Broadridge Financial Solutions, Inc. (NYSE:BR), Fifth Third Bancorp (NASDAQ:FITB), Expeditors International of Washington (NASDAQ:EXPD), Ryanair Holdings plc (NASDAQ:RYAAY), and Xylem Inc (NYSE:XYL). This group of stocks’ market caps are similar to SYF’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 31 hedge funds with bullish positions and the average amount invested in these stocks was $599 million. That figure was $1962 million in SYF’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 16 bullish hedge fund positions. Synchrony Financial (NYSE:SYF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SYF is 55.9. 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. 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 still beat the market by 16.2 percentage points. Hedge funds were also right about betting on SYF as the stock returned 24.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.