The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Synovus Financial Corp. (NYSE:SNV) and determine whether the smart money was really smart about this stock.
Is Synovus Financial Corp. (NYSE:SNV) going to take off soon? The best stock pickers were getting less bullish. The number of bullish hedge fund bets decreased by 6 in recent months. Synovus Financial Corp. (NYSE:SNV) was in 27 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 41. Our calculations also showed that SNV isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Peter Rathjens Arrowstreet Capital 394
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let's analyze the new hedge fund action regarding Synovus Financial Corp. (NYSE:SNV).
How are hedge funds trading Synovus Financial Corp. (NYSE:SNV)?
At Q2's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards SNV over the last 20 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the most valuable position in Synovus Financial Corp. (NYSE:SNV), worth close to $25 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $24.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Steven Richman's East Side Capital (RR Partners), Renaissance Technologies and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Forest Hill Capital allocated the biggest weight to Synovus Financial Corp. (NYSE:SNV), around 3.02% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, setting aside 2.63 percent of its 13F equity portfolio to SNV.
Judging by the fact that Synovus Financial Corp. (NYSE:SNV) has witnessed declining sentiment from the aggregate hedge fund industry, it's safe to say that there is a sect of money managers that slashed their positions entirely by the end of the second quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management dumped the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $9 million in stock, and Ravi Chopra's Azora Capital was right behind this move, as the fund cut about $3.9 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 6 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Synovus Financial Corp. (NYSE:SNV). We will take a look at J2 Global Inc (NASDAQ:JCOM), Sprouts Farmers Market Inc (NASDAQ:SFM), Omnicell, Inc. (NASDAQ:OMCL), Werner Enterprises, Inc. (NASDAQ:WERN), KB Home (NYSE:KBH), Bandwidth Inc. (NASDAQ:BAND), and Inovalon Holdings Inc (NASDAQ:INOV). This group of stocks' market caps are similar to SNV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JCOM,30,203643,9 SFM,25,467061,-5 OMCL,16,61075,-1 WERN,32,389115,15 KBH,23,334345,-2 BAND,30,293956,-3 INOV,13,77487,-2 Average,24.1,260955,1.6 [/table]
As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $261 million. That figure was $185 million in SNV's case. Werner Enterprises, Inc. (NASDAQ:WERN) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 13 bullish hedge fund positions. Synovus Financial Corp. (NYSE:SNV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SNV is 55.6. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately SNV wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SNV were disappointed as the stock returned -0.9% during the same time period 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 so far this year.
