Should I Avoid Synalloy Corporation (SYNL)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Synalloy Corporation (NASDAQ:SYNL) based on that data.

Is Synalloy Corporation (NASDAQ:SYNL) a healthy stock for your portfolio? Investors who are in the know were getting less bullish. The number of bullish hedge fund bets went down by 2 in recent months. Synalloy Corporation (NASDAQ:SYNL) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 7. Our calculations also showed that SYNL 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are many gauges shareholders put to use to evaluate stocks. Two of the less utilized gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best fund managers can outperform the S&P 500 by a healthy amount (see the details here).

Gavin Saitowitz of Prelude Capital

Gavin Saitowitz of Prelude Capital

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. Now let’s take a peek at the recent hedge fund action regarding Synalloy Corporation (NASDAQ:SYNL).

What have hedge funds been doing with Synalloy Corporation (NASDAQ:SYNL)?

At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SYNL over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Synalloy Corporation (NASDAQ:SYNL), which was worth $5.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $0.6 million worth of shares. Minerva Advisors, Fondren Management, and Springbok Capital 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 Fondren Management allocated the biggest weight to Synalloy Corporation (NASDAQ:SYNL), around 1.19% of its 13F portfolio. Minerva Advisors is also relatively very bullish on the stock, designating 0.21 percent of its 13F equity portfolio to SYNL.

Seeing as Synalloy Corporation (NASDAQ:SYNL) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies that elected to cut their full holdings last quarter. Intriguingly, Israel Englander’s Millennium Management dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising about $0.1 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund cut about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Synalloy Corporation (NASDAQ:SYNL). These stocks are Seelos Therapeutics, Inc. (NASDAQ:SEEL), JMP Group LLC (NYSE:JMP), Recro Pharma Inc (NASDAQ:REPH), HighPoint Resources Corporation (NYSE:HPR), Income Opportunity Realty Investors, Inc. (NYSE:IOR), Streamline Health Solutions Inc. (NASDAQ:STRM), and Natural Alternatives International, Inc. (NASDAQ:NAII). This group of stocks’ market valuations match SYNL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SEEL 4 757 2
JMP 2 87 0
REPH 13 14050 -1
HPR 8 2827 -7
IOR 1 325 1
STRM 6 18128 1
NAII 2 4323 1
Average 5.1 5785 -0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $6 million in SYNL’s case. Recro Pharma Inc (NASDAQ:REPH) is the most popular stock in this table. On the other hand Income Opportunity Realty Investors, Inc. (NYSE:IOR) is the least popular one with only 1 bullish hedge fund positions. Synalloy Corporation (NASDAQ:SYNL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SYNL is 41.1. 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 negative signal and 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately SYNL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SYNL investors were disappointed as the stock returned 6.9% since the end of September (through 11/27) 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 most of these stocks already outperformed the market in 2020.

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