At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Yamana Gold Inc. (NYSE:AUY) makes for a good investment right now.
Is AUY a good stock to buy now? Money managers were becoming less hopeful. The number of bullish hedge fund bets dropped by 1 in recent months. Yamana Gold Inc. (NYSE:AUY) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. Our calculations also showed that AUY isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a peek at the key hedge fund action surrounding Yamana Gold Inc. (NYSE:AUY).
Do Hedge Funds Think AUY Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AUY over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Yamana Gold Inc. (NYSE:AUY), which was worth $158.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $44.7 million worth of shares. Two Sigma Advisors, Citadel Investment Group, and Millennium Management 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 Renaissance Technologies allocated the biggest weight to Yamana Gold Inc. (NYSE:AUY), around 0.16% of its 13F portfolio. Gotham Asset Management is also relatively very bullish on the stock, dishing out 0.11 percent of its 13F equity portfolio to AUY.
Because Yamana Gold Inc. (NYSE:AUY) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedge funds who sold off their positions entirely heading into Q4. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management dropped the biggest position of the 750 funds watched by Insider Monkey, worth an estimated $5.5 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Yamana Gold Inc. (NYSE:AUY). We will take a look at Plug Power, Inc. (NASDAQ:PLUG), SiteOne Landscape Supply, Inc. (NYSE:SITE), The AZEK Company Inc. (NYSE:AZEK), Corelogic Inc (NYSE:CLGX), BWX Technologies Inc (NYSE:BWXT), Pearson PLC (NYSE:PSO), and CACI International Inc (NYSE:CACI). This group of stocks’ market caps resemble AUY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLUG | 21 | 389379 | 1 |
| SITE | 28 | 96129 | 10 |
| AZEK | 34 | 489399 | 8 |
| CLGX | 45 | 1712392 | 10 |
| BWXT | 21 | 166407 | -6 |
| PSO | 5 | 16445 | -2 |
| CACI | 31 | 575408 | -3 |
| Average | 26.4 | 492223 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $492 million. That figure was $297 million in AUY’s case. Corelogic Inc (NYSE:CLGX) is the most popular stock in this table. On the other hand Pearson PLC (NYSE:PSO) is the least popular one with only 5 bullish hedge fund positions. Yamana Gold Inc. (NYSE:AUY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AUY is 40.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately AUY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AUY investors were disappointed as the stock returned -7.4% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
