Was The Smart Money Right About Synopsys, Inc. (SNPS)?
With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Synopsys, Inc. (NASDAQ:SNPS).
Synopsys, Inc. (NASDAQ:SNPS) has experienced an increase in enthusiasm from smart money of late. Synopsys, Inc. (NASDAQ:SNPS) was in 40 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 45. Our calculations also showed that SNPS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. Keeping this in mind we're going to take a gander at the fresh hedge fund action surrounding Synopsys, Inc. (NASDAQ:SNPS).
Do Hedge Funds Think SNPS Is A Good Stock To Buy Now?
At the end of December, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the previous quarter. On the other hand, there were a total of 45 hedge funds with a bullish position in SNPS a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the biggest position in Synopsys, Inc. (NASDAQ:SNPS). Alkeon Capital Management has a $703.8 million position in the stock, comprising 1.1% of its 13F portfolio. The second most bullish fund manager is ARK Investment Management, managed by Catherine D. Wood, which holds a $264.7 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Ken Griffin's Citadel Investment Group, Noam Gottesman's GLG Partners and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Crestwood Capital Management allocated the biggest weight to Synopsys, Inc. (NASDAQ:SNPS), around 8.35% of its 13F portfolio. Fundsmith Long/Short Fund is also relatively very bullish on the stock, setting aside 4.82 percent of its 13F equity portfolio to SNPS.
Consequently, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in Synopsys, Inc. (NASDAQ:SNPS). Arrowstreet Capital had $67.1 million invested in the company at the end of the quarter. Michael Rockefeller and Karl Kroeker's Woodline Partners also made a $20.4 million investment in the stock during the quarter. The following funds were also among the new SNPS investors: Terry Smith's Fundsmith Long/Short Fund, Richard Schimel and Lawrence Sapanski's Cinctive Capital Management, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Synopsys, Inc. (NASDAQ:SNPS) but similarly valued. These stocks are Amphenol Corporation (NYSE:APH), Digital Realty Trust, Inc. (NYSE:DLR), Chipotle Mexican Grill, Inc. (NYSE:CMG), BCE Inc. (NYSE:BCE), TC Energy Corporation (NYSE:TRP), Canadian Imperial Bank of Commerce (NYSE:CM), and Cadence Design Systems Inc (NASDAQ:CDNS). This group of stocks' market valuations resemble SNPS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APH,41,1049030,-8 DLR,23,316827,-2 CMG,35,3374121,-17 BCE,13,90782,3 TRP,19,249036,3 CM,13,210773,1 CDNS,32,1405426,-5 Average,25.1,956571,-3.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $957 million. That figure was $1685 million in SNPS's case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 bullish hedge fund positions. Synopsys, Inc. (NASDAQ:SNPS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNPS is 84.9. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately SNPS wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SNPS were disappointed as the stock returned -4.7% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
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