The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards Sibanye Gold Ltd (ADR) (NYSE:SBGL) and see how it was affected.
Sibanye Gold Ltd (ADR) (NYSE:SBGL) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. At the end of this article, we will also compare Sibanye Gold Ltd (ADR) (NYSE:SBGL) to other stocks, including Renren Inc (NYSE:RENN), TerraForm Global Inc (NASDAQ:GLBL), and MiMedx Group Inc (NASDAQ:MDXG) to get a better sense of its popularity.
If you’d ask most investors, hedge funds are viewed as worthless, old financial vehicles of years past. While there are greater than 8000 funds in operation today, our experts choose to focus on the leaders of this group, about 700 funds. Most estimates calculate that this group of people presides over the majority of the smart money’s total capital, and by following their matchless investments, Insider Monkey has unsheathed a few investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, let’s view the recent action regarding Sibanye Gold Ltd (ADR) (NYSE:SBGL).
How have hedgies been trading Sibanye Gold Ltd (ADR) (NYSE:SBGL)?
Heading into Q4, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 11% from the second quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies holds the number one position in Sibanye Gold Ltd (ADR) (NYSE:SBGL). Renaissance Technologies has an $8 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $5.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism encompass Ari Zweiman’s 683 Capital Partners, Matthew Hulsizer’s PEAK6 Capital Management, and Ken Griffin’s Citadel Investment Group.
Judging by the fact that Sibanye Gold Ltd (ADR) (NYSE:SBGL) has experienced a falling interest from hedge fund managers, logic holds that there were a few fund managers that slashed their entire stakes by the end of the third quarter. Interestingly, John Burbank’s Passport Capital dropped the largest stake of the 700 funds followed by Insider Monkey, comprising an estimated $11.4 million in stock. Kurt Billick’s fund, Bocage Capital, also cut its stock, about $0.8 million worth of shares. These moves are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Sibanye Gold Ltd (ADR) (NYSE:SBGL) but similarly valued. We will take a look at Renren Inc (NYSE:RENN), TerraForm Global Inc (NASDAQ:GLBL), MiMedx Group Inc (NASDAQ:MDXG), and American Woodmark Corporation (NASDAQ:AMWD). This group of stock market caps resembles as Sibanye Gold Ltd (ADR) (NYSE:SBGL)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RENN | 6 | 8466 | -1 |
| GLBL | 23 | 251228 | 23 |
| MDXG | 17 | 24004 | -5 |
| AMWD | 15 | 106150 | -5 |
As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $18 million in Sibanye Gold Ltd (ADR) (NYSE:SBGL)’s case. TerraForm Global Inc (NASDAQ:GLBL) is the most popular stock in this table. On the other hand, Renren Inc (NYSE:RENN) is the least popular one with only 6 bullish hedge fund positions. Sibanye Gold Ltd (ADR) (NYSE:SBGL) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, TerraForm Global Inc (NASDAQ:GLBL) might be a better candidate to consider a long position.
