Were Hedge Funds Right About Flocking Into Synopsys, Inc. (SNPS) ?

“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Synopsys, Inc. (NASDAQ:SNPS) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Synopsys, Inc. (NASDAQ:SNPS) the right investment to pursue these days? Prominent investors are becoming more confident. The number of long hedge fund bets inched up by 4 recently. Our calculations also showed that SNPS isn’t among the 30 most popular stocks among hedge funds. SNPS was in 34 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 30 hedge funds in our database with SNPS positions at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Barry Rosenstein JANA PARTNERS

Let’s analyze the key hedge fund action regarding Synopsys, Inc. (NASDAQ:SNPS).

What have hedge funds been doing with Synopsys, Inc. (NASDAQ:SNPS)?

Heading into the first quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in SNPS a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).


Of the funds tracked by Insider Monkey, Panayotis Takis Sparaggis’s Alkeon Capital Management has the biggest position in Synopsys, Inc. (NASDAQ:SNPS), worth close to $231.3 million, comprising 1.5% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $212.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers with similar optimism contain D. E. Shaw’s D E Shaw, John Armitage’s Egerton Capital Limited and Cliff Asness’s AQR Capital Management.

Now, specific money managers were leading the bulls’ herd. JANA Partners, managed by Barry Rosenstein, established the largest position in Synopsys, Inc. (NASDAQ:SNPS). JANA Partners had $38.8 million invested in the company at the end of the quarter. Vikas Lunia’s Lunia Capital also initiated a $18.3 million position during the quarter. The following funds were also among the new SNPS investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Steve Cohen’s Point72 Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Synopsys, Inc. (NASDAQ:SNPS) but similarly valued. These stocks are Tenaris S.A. (NYSE:TS), The Cooper Companies, Inc. (NYSE:COO), Principal Financial Group Inc (NASDAQ:PFG), and CNH Industrial NV (NYSE:CNHI). All of these stocks’ market caps are closest to SNPS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TS 13 371288 -5
COO 21 1104178 3
PFG 18 98221 3
CNHI 16 295732 2
Average 17 467355 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $467 million. That figure was $1091 million in SNPS’s case. The Cooper Companies, Inc. (NYSE:COO) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Synopsys, Inc. (NASDAQ:SNPS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on SNPS as the stock returned 29.6% and outperformed the market as well.

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