We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX).
Is Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) undervalued? Hedge funds are in a pessimistic mood. The number of long hedge fund positions retreated by 1 recently. Our calculations also showed that SNDX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SNDX was in 7 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with SNDX positions at the end of the previous quarter.
Video: Click the image to 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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the key hedge fund action regarding Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX).
What have hedge funds been doing with Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SNDX over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Biotechnology Value Fund held the most valuable stake in Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), which was worth $13.2 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $9.3 million worth of shares. 683 Capital Partners, Renaissance Technologies, and OrbiMed Advisors 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 allocated the biggest weight to Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), around 1.39% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, setting aside 0.97 percent of its 13F equity portfolio to SNDX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Athanor Capital. 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 also examine hedge fund activity in other stocks similar to Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX). We will take a look at Genie Energy Ltd (NYSE:GNE), Net 1 UEPS Technologies Inc (NASDAQ:UEPS), MDC Partners Inc. (NASDAQ:MDCA), and Osmotica Pharmaceuticals plc (NASDAQ:OSMT). This group of stocks’ market values are closest to SNDX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GNE | 12 | 10827 | 2 |
| UEPS | 12 | 68838 | 1 |
| MDCA | 13 | 39751 | -2 |
| OSMT | 3 | 950 | -3 |
| Average | 10 | 30092 | -0.5 |
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 $30 million. That figure was $37 million in SNDX’s case. MDC Partners Inc. (NASDAQ:MDCA) is the most popular stock in this table. On the other hand Osmotica Pharmaceuticals plc (NASDAQ:OSMT) is the least popular one with only 3 bullish hedge fund positions. Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is not the least popular stock in this group but hedge fund interest is still below average. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SNDX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SNDX investors were disappointed as the stock returned -2.4% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
