Is Caledonia Mining Corporation (CMCL) A Good Stock To Buy?

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 Caledonia Mining Corporation Plc (NYSE:CMCL) makes for a good investment right now.

Is Caledonia Mining Corporation Plc (NYSE:CMCL) a buy, sell, or hold? Investors who are in the know were buying. The number of bullish hedge fund bets increased by 1 recently. Caledonia Mining Corporation Plc (NYSE:CMCL) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CMCL 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Paul Marshall of Marshall Wace

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 10 most profitable companies in the world 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. Now let’s review the latest hedge fund action regarding Caledonia Mining Corporation Plc (NYSE:CMCL).

How are hedge funds trading Caledonia Mining Corporation Plc (NYSE:CMCL)?

Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CMCL 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.

Of the funds tracked by Insider Monkey, Sloane Robinson Investment Management, managed by Hugh Sloane, holds the biggest position in Caledonia Mining Corporation Plc (NYSE:CMCL). Sloane Robinson Investment Management has a $1.8 million position in the stock, comprising 1.2% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $1.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism encompass Paul Marshall and Ian Wace’s Marshall Wace LLP, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and . In terms of the portfolio weights assigned to each position Sloane Robinson Investment Management allocated the biggest weight to Caledonia Mining Corporation Plc (NYSE:CMCL), around 1.22% of its 13F portfolio. Marshall Wace LLP is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to CMCL.

Consequently, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in Caledonia Mining Corporation Plc (NYSE:CMCL). Arrowstreet Capital had $0.2 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Caledonia Mining Corporation Plc (NYSE:CMCL) but similarly valued. These stocks are Lifetime Brands Inc (NASDAQ:LCUT), Gamida Cell Ltd. (NASDAQ:GMDA), Verastem Inc (NASDAQ:VSTM), Mastech Digital, Inc. (NYSE:MHH), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Organigram Holdings Inc. (NASDAQ:OGI), and Vera Bradley, Inc. (NASDAQ:VRA). This group of stocks’ market valuations are similar to CMCL’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $5 million in CMCL’s case. Vera Bradley, Inc. (NASDAQ:VRA) is the most popular stock in this table. On the other hand Mastech Digital, Inc. (NYSE:MHH) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Caledonia Mining Corporation Plc (NYSE:CMCL) is even less popular than MHH. Our overall hedge fund sentiment score for CMCL is 36. 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. Hedge funds dodged a bullet by taking a bearish stance towards CMCL. Our calculations showed that the top 20 most popular hedge fund stocks 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 November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately CMCL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CMCL investors were disappointed as the stock returned -12.1% since the end of the third quarter (through 11/27) 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 so far in 2020.

Disclosure: None. This article was originally published at Insider Monkey.