At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards MAG Silver Corporation (NYSE:MAG).
Is MAG Silver Corporation (NYSE:MAG) worth your attention right now? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets were cut by 2 in recent months. Our calculations also showed that MAG isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.
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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the key hedge fund action surrounding MAG Silver Corporation (NYSE:MAG).
What does smart money think about MAG Silver Corporation (NYSE:MAG)?
At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in MAG over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Sprott Asset Management held the most valuable stake in MAG Silver Corporation (NYSE:MAG), which was worth $70.8 million at the end of the third quarter. On the second spot was D E Shaw which amassed $3.4 million worth of shares. Royce & Associates, PEAK6 Capital Management, and Citadel Investment Group 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 Sprott Asset Management allocated the biggest weight to MAG Silver Corporation (NYSE:MAG), around 6.49% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, dishing out 1.24 percent of its 13F equity portfolio to MAG.
Judging by the fact that MAG Silver Corporation (NYSE:MAG) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds that slashed their full holdings by the end of the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of all the hedgies watched by Insider Monkey, totaling about $10.2 million in stock. Renaissance Technologies, also cut its stock, about $1.8 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MAG Silver Corporation (NYSE:MAG) but similarly valued. We will take a look at JinkoSolar Holding Co., Ltd. (NYSE:JKS), Cryolife Inc (NYSE:CRY), New Mountain Finance Corp. (NYSE:NMFC), and Stock Yards Bancorp, Inc. (NASDAQ:SYBT). This group of stocks’ market values are closest to MAG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JKS | 7 | 41159 | -5 |
| CRY | 7 | 35479 | -3 |
| NMFC | 13 | 13539 | -4 |
| SYBT | 7 | 12244 | -1 |
| Average | 8.5 | 25605 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $80 million in MAG’s case. New Mountain Finance Corp. (NYSE:NMFC) is the most popular stock in this table. On the other hand JinkoSolar Holding Co., Ltd. (NYSE:JKS) is the least popular one with only 7 bullish hedge fund positions. MAG Silver Corporation (NYSE:MAG) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on MAG as the stock returned 57.8% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
