Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published 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. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Wheaton Precious Metals Corp. (NYSE:WPM).
Is Wheaton Precious Metals Corp. (NYSE:WPM) an attractive investment today? Prominent investors are turning bullish. The number of long hedge fund positions inched up by 1 lately. Our calculations also showed that WPM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). WPM was in 30 hedge funds’ portfolios at the end of December. There were 29 hedge funds in our database with WPM positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are dozens of methods stock traders use to evaluate stocks. A pair of the less utilized methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace their index-focused peers by a significant amount (see the details here).
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the new hedge fund action surrounding Wheaton Precious Metals Corp. (NYSE:WPM).
How have hedgies been trading Wheaton Precious Metals Corp. (NYSE:WPM)?
At Q4’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in WPM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Wheaton Precious Metals Corp. (NYSE:WPM) was held by Horizon Asset Management, which reported holding $106.3 million worth of stock at the end of September. It was followed by GLG Partners with a $67.1 million position. Other investors bullish on the company included Kopernik Global Investors, Renaissance Technologies, and Sprott Asset Management. In terms of the portfolio weights assigned to each position Kopernik Global Investors allocated the biggest weight to Wheaton Precious Metals Corp. (NYSE:WPM), around 10.03% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, earmarking 8.47 percent of its 13F equity portfolio to WPM.
As one would reasonably expect, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Wheaton Precious Metals Corp. (NYSE:WPM). Arrowstreet Capital had $34.1 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also made a $10.7 million investment in the stock during the quarter. The other funds with brand new WPM positions are Minhua Zhang’s Weld Capital Management and Frederick DiSanto’s Ancora Advisors.
Let’s now review hedge fund activity in other stocks similar to Wheaton Precious Metals Corp. (NYSE:WPM). We will take a look at DocuSign, Inc. (NASDAQ:DOCU), Expeditors International of Washington (NASDAQ:EXPD), Suzano S.A. (NYSE:SUZ), and The AES Corporation (NYSE:AES). This group of stocks’ market valuations match WPM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOCU | 33 | 905820 | 5 |
| EXPD | 27 | 290323 | -3 |
| SUZ | 4 | 40305 | 0 |
| AES | 27 | 694739 | 0 |
| Average | 22.75 | 482797 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $483 million. That figure was $477 million in WPM’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand Suzano S.A. (NYSE:SUZ) is the least popular one with only 4 bullish hedge fund positions. Wheaton Precious Metals Corp. (NYSE:WPM) is not the most popular stock in this group but hedge fund interest is still above average. 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on WPM as the stock returned -17.6% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
