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Synchrony Financial (SYF): Are Hedge Funds Right About This Stock?

While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors are keeping their optimism regarding the current bull run, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Synchrony Financial (NYSE:SYF).

Is Synchrony Financial (NYSE:SYF) a buy right now? The best stock pickers are getting more bullish. The number of long hedge fund bets moved up by 5 in recent months. Our calculations also showed that syf isn’t among the 30 most popular stocks among hedge funds. SYF was in 35 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with SYF positions at the end of the previous quarter.

In the financial world there are many formulas stock traders can use to assess stocks. A couple of the most useful formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best investment managers can beat their index-focused peers by a solid amount (see the details here).

Warren Buffett and Billionaires

Let’s take a gander at the key hedge fund action regarding Synchrony Financial (NYSE:SYF).

Hedge fund activity in Synchrony Financial (NYSE:SYF)

At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in SYF heading into this year. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

No of Hedge Funds with SYF Positions

According to Insider Monkey’s hedge fund database, Warren Buffett’s Berkshire Hathaway has the number one position in Synchrony Financial (NYSE:SYF), worth close to $646.6 million, corresponding to 0.3% of its total 13F portfolio. The second most bullish fund manager is Seth Klarman of Baupost Group, with a $507.6 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw.

Consequently, key hedge funds were breaking ground themselves. King Street Capital, managed by Brian J. Higgins, established the most outsized position in Synchrony Financial (NYSE:SYF). King Street Capital had $83.9 million invested in the company at the end of the quarter. John Smith Clark’s Southpoint Capital Advisors also made a $71.5 million investment in the stock during the quarter. The following funds were also among the new SYF investors: Eric F. Billings’s Billings Capital Management, Ravi Chopra’s Azora Capital, and Gregg Moskowitz’s Interval Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Synchrony Financial (NYSE:SYF) but similarly valued. We will take a look at Interactive Brokers Group, Inc. (NASDAQ:IBKR), CenturyLink, Inc. (NYSE:CTL), First Data Corporation (NYSE:FDC), and Northern Trust Corporation (NASDAQ:NTRS). All of these stocks’ market caps resemble SYF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IBKR 29 990268 -4
CTL 24 1711549 3
FDC 61 3894803 12
NTRS 35 1039841 4
Average 37.25 1909115 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.91 billion. That figure was $2.21 billion in SYF’s case. First Data Corporation (NYSE:FDC) is the most popular stock in this table. On the other hand CenturyLink, Inc. (NYSE:CTL) is the least popular one with only 24 bullish hedge fund positions. Synchrony Financial (NYSE:SYF) 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. In this regard FDC might be a better candidate to consider a long position.

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

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