How Royal Gold, Inc (USA) (RGLD) Stacks Up Against Its Peers?

Hedge funds may not always be right, even collectively, but data shows that their consensus long positions have historically outperformed broader market benchmarks. For example, the Goldman Sachs’ VIP list, which includes the 50 stocks that appear the most often among hedge funds’ top-10 largest holdings, has beaten the S&P 500 gauge on a quarterly basis 64% of the time since 2001, including last year, when it delivered impressive 23% returns in a flat market. Meanwhile, Goldman Sachs’ list of the 20 ‘Most Concentrated’ stocks, which hedge funds own the highest percentage of in terms of the stock’s float, has gained 18% this year to the S&P 500’s 8% gains. Clearly, it’s worthwhile to pay attention to what hedge funds are buying, so let’s check out the latest 13F filing data to see what they think about Royal Gold, Inc (USA) (NASDAQ:RGLD).

Is Royal Gold, Inc (USA) (NASDAQ:RGLD) an outstanding investment now? Hedge funds are altogether betting on the stock. The number of long hedge fund bets moved up by 2 recently. In this way, there were 19 hedge funds in our database with RGLD holdings at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Scotts Miracle-Gro Co (NYSE:SMG), Weatherford International Ltd (NYSE:WFT), and Gentex Corporation (NASDAQ:GNTX) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What does the smart money think about Royal Gold, Inc (USA) (NASDAQ:RGLD)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a gain of 12% from the second quarter of 2016. On the other hand, there were a total of 20 hedge funds with a bullish position in RGLD at the beginning of this year. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Iben’s Kopernik Global Investors has the largest position in Royal Gold, Inc (USA) (NASDAQ:RGLD), worth close to $50.6 million, comprising 10.8% of its total 13F portfolio. The second largest stake is held by Murray Stahl of Horizon Asset Management holding a $34.2 million position; the fund has 1% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions consist of Jim Simons’ Renaissance Technologies, and Eric Sprott’s Sprott Asset Management. We should note that two of these hedge funds (Kopernik Global Investors and Sprott Asset Management) are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Renaissance Technologies assembled the biggest position in Royal Gold, Inc (USA) (NASDAQ:RGLD) with $20.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $15 million investment in the stock during the quarter. The other funds with new positions in the stock are George Hall’s Clinton Group, Cliff Asness’ AQR Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Royal Gold, Inc (USA) (NASDAQ:RGLD) but similarly valued. These stocks are Scotts Miracle-Gro Co (NYSE:SMG), Weatherford International Ltd (NYSE:WFT), Gentex Corporation (NASDAQ:GNTX), and EPR Properties (NYSE:EPR). This group of stocks’ market values match RGLD’s market value.

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 $303 million. That figure was $192 million in RGLD’s case. Weatherford International Ltd (NYSE:WFT) is the most popular stock in this table. On the other hand Scotts Miracle-Gro Co (NYSE:SMG) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Royal Gold, Inc USA) (NASDAQ:RGLD) is even less popular than SMG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None