Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish an article with the title “Recession is Imminent: We Need A Travel Ban NOW”. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-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 second quarter. One of these stocks was Barrick Gold Corporation (NYSE:GOLD).
Barrick Gold Corporation (NYSE:GOLD) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that GOLD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind we’re going to take a peek at the key hedge fund action surrounding Barrick Gold Corporation (NYSE:GOLD).
How have hedgies been trading Barrick Gold Corporation (NYSE:GOLD)?
At the end of the fourth quarter, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in GOLD over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Barrick Gold Corporation (NYSE:GOLD), which was worth $290.9 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $188.2 million worth of shares. Slate Path Capital, Adage Capital Management, and Oldfield Partners 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 Oldfield Partners allocated the biggest weight to Barrick Gold Corporation (NYSE:GOLD), around 10.13% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, setting aside 9.81 percent of its 13F equity portfolio to GOLD.
As one would reasonably expect, key money managers were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, created the biggest position in Barrick Gold Corporation (NYSE:GOLD). Driehaus Capital had $33.7 million invested in the company at the end of the quarter. Ryan Caldwell’s Chiron Investment Management also made a $22.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Matthew Tewksbury’s Stevens Capital Management, and Robert Vincent McHugh’s Jade Capital Advisors.
Let’s also examine hedge fund activity in other stocks similar to Barrick Gold Corporation (NYSE:GOLD). We will take a look at Southern Copper Corporation (NYSE:SCCO), General Mills, Inc. (NYSE:GIS), Amphenol Corporation (NYSE:APH), and TE Connectivity Ltd. (NYSE:TEL). This group of stocks’ market values match GOLD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCCO | 20 | 230399 | 4 |
| GIS | 37 | 907163 | 0 |
| APH | 36 | 715909 | 3 |
| TEL | 44 | 1839961 | 10 |
| Average | 34.25 | 923358 | 4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $923 million. That figure was $1815 million in GOLD’s case. TE Connectivity Ltd. (NYSE:TEL) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Barrick Gold Corporation (NYSE:GOLD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still managed to beat the market by 1.9 percentage points. Hedge funds were also right about betting on GOLD as the stock returned 7.6% so far in Q1 (through March 9th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
