Syndax Pharmaceuticals, Inc. (SNDX) Fell Out Of Favor With Hedge Funds

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) to find out whether there were any major changes in hedge funds’ views.

Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) was in 33 hedge funds’ portfolios at the end of March. The all time high for this statistic is 37. SNDX has experienced a decrease in enthusiasm from smart money lately. There were 37 hedge funds in our database with SNDX positions at the end of the fourth quarter. Our calculations also showed that SNDX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andre Perold of HighVista Strategies

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s go over the new hedge fund action surrounding Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX).

Do Hedge Funds Think SNDX Is A Good Stock To Buy Now?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in SNDX a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), with a stake worth $55.9 million reported as of the end of March. Trailing Avoro Capital Advisors (venBio Select Advisor) was Citadel Investment Group, which amassed a stake valued at $49.9 million. Nantahala Capital Management, Adage Capital Management, and Partner Fund 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 Ghost Tree Capital allocated the biggest weight to Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX), around 6.17% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, earmarking 2.57 percent of its 13F equity portfolio to SNDX.

Judging by the fact that Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their entire stakes in the first quarter. It’s worth mentioning that OrbiMed Advisors dropped the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $26 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dumped about $16.8 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX). We will take a look at Nkarta, Inc. (NASDAQ:NKTX), Personalis, Inc. (NASDAQ:PSNL), Scorpio Tankers Inc. (NYSE:STNG), American Finance Trust, Inc. (NASDAQ:AFIN), Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), Cortexyme, Inc. (NASDAQ:CRTX), and Coherus Biosciences Inc (NASDAQ:CHRS). This group of stocks’ market caps are similar to SNDX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NKTX 15 384765 1
PSNL 13 220652 -2
STNG 20 87802 2
AFIN 7 11773 -1
RYTM 18 266928 7
CRTX 3 1822 -5
CHRS 23 144394 3
Average 14.1 159734 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $486 million in SNDX’s case. Coherus Biosciences Inc (NASDAQ:CHRS) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Syndax Pharmaceuticals, Inc. (NASDAQ:SNDX) is more popular among hedge funds. Our overall hedge fund sentiment score for SNDX is 77.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Unfortunately SNDX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SNDX were disappointed as the stock returned -21.3% since the end of the first quarter (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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