Hedge Funds Aren’t Crazy About Pan American Silver Corp. (PAAS) Anymore

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Pan American Silver Corp. (NASDAQ:PAAS), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Pan American Silver Corp. (NASDAQ:PAAS) shareholders have witnessed a decrease in hedge fund interest in recent months. Pan American Silver Corp. (NASDAQ:PAAS) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistic is 30. There were 27 hedge funds in our database with PAAS positions at the end of the first quarter. Our calculations also showed that PAAS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 79 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.

Eric Sprott of Sprott Asset Management

At Insider Monkey, we scour multiple sources to uncover 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 EV 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. With all of this in mind let’s take a gander at the key hedge fund action encompassing Pan American Silver Corp. (NASDAQ:PAAS).

Do Hedge Funds Think PAAS Is A Good Stock To Buy Now?

At second quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PAAS over the last 24 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

The largest stake in Pan American Silver Corp. (NASDAQ:PAAS) was held by Slate Path Capital, which reported holding $98.5 million worth of stock at the end of June. It was followed by Sprott Asset Management with a $89.7 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Lansdowne Partners. In terms of the portfolio weights assigned to each position Slate Path Capital allocated the biggest weight to Pan American Silver Corp. (NASDAQ:PAAS), around 5.5% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, earmarking 5.23 percent of its 13F equity portfolio to PAAS.

Judging by the fact that Pan American Silver Corp. (NASDAQ:PAAS) has experienced falling interest from hedge fund managers, it’s easy to see that there exists a select few hedge funds that slashed their full holdings in the second quarter. Interestingly, Richard Driehaus’s Driehaus Capital sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $52.9 million in stock. David Halpert’s fund, Prince Street Capital Management, also cut its stock, about $4.8 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds in the second quarter.

Let’s now review hedge fund activity in other stocks similar to Pan American Silver Corp. (NASDAQ:PAAS). We will take a look at Rexnord Corp (NYSE:RXN), NOV Inc. (NYSE:NOV), Stag Industrial Inc (NYSE:STAG), NCR Corporation (NYSE:NCR), AbCellera Biologics Inc. (NASDAQ:ABCL), DigitalOcean Holdings, Inc. (NYSE:DOCN), and Yatsen Holding Limited (NYSE:YSG). This group of stocks’ market values resemble PAAS’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $520 million. That figure was $312 million in PAAS’s case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Stag Industrial Inc (NYSE:STAG) is the least popular one with only 15 bullish hedge fund positions. Pan American Silver Corp. (NASDAQ:PAAS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PAAS is 45.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately PAAS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on PAAS were disappointed as the stock returned -8.5% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 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.