Should You Sell Your Position in Synopsys (SNPS)?

TimesSquare Capital Management, an equity investment management company, released its “U.S. Focus Growth Strategy” first-quarter investor letter. A copy of the letter can be downloaded here. In the first quarter, the strategy returned 11.72% (gross) and 11.49% (net) compared to 9.50% for the Russell Midcap Growth Index. The first-quarter performance was barbelled, particularly for U.S. small- to mid-cap equities. The best-performing stocks were those with the highest quality (return on equity) or low valuations (price/earnings). Stocks with higher risk (beta) or stocks with hyper-growth expectations were also rewarded. In addition, please check the fund’s top five holdings to know its best picks in 2024.

TimesSquare Capital U.S. Focus Growth Strategy highlighted stocks like Synopsys, Inc. (NASDAQ:SNPS), in the first quarter 2024 investor letter. Synopsys, Inc. (NASDAQ:SNPS) offers electronic design automation software products used to design and test integrated circuits. The one-month return of Synopsys, Inc. (NASDAQ:SNPS) was 3.09%, and its shares gained 45.14% of their value over the last 52 weeks. On June 21, 2024, Synopsys, Inc. (NASDAQ:SNPS) stock closed at $605.53 per share with a market capitalization of $92.777 billion.

TimesSquare Capital U.S. Focus Growth Strategy stated the following regarding Synopsys, Inc. (NASDAQ:SNPS) in its first quarter 2024 investor letter:

"We had been trimming Synopsys, Inc. (NASDAQ:SNPS) as its market capitalization grew and it approached our price target. This quarter, Synopsys confirmed its plans to acquire ANSYS, Inc. Though the deal has long-term strategic benefits, in the near term we believe that will weigh on overall growth for Synopsys, add notable leverage to its balance sheet, and create more volatility for its shares. As a result, we sold our position."

A close-up of a tech engineer soldering a modern system-on-chip circuit board in a laboratory setting.

Synopsys, Inc. (NASDAQ:SNPS) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 64 hedge fund portfolios held Synopsys, Inc. (NASDAQ:SNPS) at the end of the first quarter which was 66 in the previous quarter. In the first quarter, Synopsys, Inc. (NASDAQ:SNPS) generated $1.45 billion in revenues, a 15% increase over prior year’s first quarter. While we acknowledge the potential of Synopsys, Inc. (NASDAQ:SNPS) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed Synopsys, Inc. (NASDAQ:SNPS) in another article and shared the list of largest software companies in the world by market cap. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.

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