Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Barrick Gold Corporation (USA) (NYSE:ABX).
Barrick Gold Corporation (USA) (NYSE:ABX) was included in the equity portfolios of 45 hedge funds tracked by Insider Monkey at the end of September. The company saw a decrease in enthusiasm from smart money during the third quarter, since, at the end of June, 33 funds held shares of the company. 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 Tyson Foods, Inc. (NYSE:TSN), AvalonBay Communities Inc (NYSE:AVB), and Pioneer Natural Resources (NYSE:PXD) to gather more data points.
Follow Barrick Gold Corp (NYSE:GOLD)
Follow Barrick Gold Corp (NYSE:GOLD)
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.
Sashkin/Shutterstock.com
With all of this in mind, let’s analyze the fresh action encompassing Barrick Gold Corporation (USA) (NYSE:ABX).
How are hedge funds trading Barrick Gold Corporation (USA) (NYSE:ABX)?
At the end of the third quarter, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, down by 15% from the previous quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the number one position in Barrick Gold Corporation (USA) (NYSE:ABX), worth close to $400.1 million, corresponding to 1.3% of its total 13F portfolio. The second most bullish fund is Phill Gross and Robert Atchinson’s Adage Capital Management, with a $216 million position; 0.6% of its 13F portfolio is allocated to the company. Some other peers with similar optimism encompass Jim Simons’ Renaissance Technologies, William B. Gray’s Orbis Investment Management and Cliff Asness’s AQR Capital Management.
Judging by the fact that Barrick Gold Corporation (USA) (NYSE:ABX) has experienced falling interest from the smart money, logic holds that there is a sect of fund managers that slashed their positions entirely between July and September. First Eagle Investment Management cut the biggest stake of all the hedgies watched by Insider Monkey, totaling an estimated $800.7 million in call options, and Bruce Kovner’s Caxton Associates LP was right behind this move, as the fund cut about $324.5 million worth of shares.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Barrick Gold Corporation (USA) (NYSE:ABX) but similarly valued. We will take a look at Tyson Foods, Inc. (NYSE:TSN), AvalonBay Communities Inc (NYSE:AVB), Pioneer Natural Resources (NYSE:PXD), and CBS Corporation (NYSE:CBS). This group of stocks’ market valuations match ABX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSN | 35 | 1630953 | -5 |
| AVB | 16 | 511631 | -3 |
| PXD | 72 | 4119576 | -2 |
| CBS | 56 | 2867072 | -3 |
As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $2.28 billion. That figure was $1.72 billion in ABX’s case. Pioneer Natural Resources (NYSE:PXD) is the most popular stock in this table, while AvalonBay Communities Inc (NYSE:AVB) is the least popular one with only 16 bullish hedge fund positions. Barrick Gold Corporation (USA) (NYSE:ABX) 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. In this regard Pioneer Natural Resources (NYSE:PXD) might be a better candidate to consider a long position.
