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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Kirkland Lake Gold Ltd. (NYSE:KL).
Is Kirkland Lake Gold Ltd. (NYSE:KL) ready to rally soon? Prominent investors are in a bullish mood. The number of bullish hedge fund bets improved by 8 recently. Our calculations also showed that KL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). KL was in 24 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with KL holdings at the end of the previous quarter.
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 was able to identify in advance a select group of hedge fund holdings that 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.
Paul Marshall of Marshall Wace
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. With all of this in mind let’s view the key hedge fund action encompassing Kirkland Lake Gold Ltd. (NYSE:KL).
Hedge fund activity in Kirkland Lake Gold Ltd. (NYSE:KL)
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the third quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in KL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Kirkland Lake Gold Ltd. (NYSE:KL). Arrowstreet Capital has a $169.8 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $110 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Noam Gottesman’s GLG Partners, John Overdeck and David Siegel’s Two Sigma Advisors and Brian Ashford-Russell and Tim Woolley’s Polar Capital. In terms of the portfolio weights assigned to each position Greywolf Capital Management allocated the biggest weight to Kirkland Lake Gold Ltd. (NYSE:KL), around 20.37% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, designating 1.41 percent of its 13F equity portfolio to KL.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, created the largest position in Kirkland Lake Gold Ltd. (NYSE:KL). TIG Advisors had $19.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $17.7 million investment in the stock during the quarter. The following funds were also among the new KL investors: Simon Sadler’s Segantii Capital, Lee Ainslie’s Maverick Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kirkland Lake Gold Ltd. (NYSE:KL) but similarly valued. These stocks are AngloGold Ashanti Limited (NYSE:AU), Caesars Entertainment Corp (NASDAQ:CZR), Omega Healthcare Investors Inc (NYSE:OHI), and TIM Participacoes SA (NYSE:TSU). This group of stocks’ market valuations match KL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AU | 17 | 542302 | -2 |
| CZR | 46 | 4006799 | 0 |
| OHI | 18 | 147489 | 0 |
| TSU | 11 | 351539 | -3 |
| Average | 23 | 1262032 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $1262 million. That figure was $509 million in KL’s case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand TIM Participacoes SA (NYSE:TSU) is the least popular one with only 11 bullish hedge fund positions. Kirkland Lake Gold Ltd. (NYSE:KL) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 beat the market by 3.2 percentage points. Unfortunately KL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KL were disappointed as the stock returned -40.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
