“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards IAMGOLD Corporation (NYSE:IAG).
IAMGOLD Corporation (NYSE:IAG) was in 13 hedge funds’ portfolios at the end of March. IAG has experienced a decrease in hedge fund sentiment recently. There were 14 hedge funds in our database with IAG positions at the end of the previous quarter. Our calculations also showed that IAG isn’t among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
We’re going to analyze the latest hedge fund action regarding IAMGOLD Corporation (NYSE:IAG).
What does smart money think about IAMGOLD Corporation (NYSE:IAG)?
Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in IAG a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the biggest position in IAMGOLD Corporation (NYSE:IAG), worth close to $80.3 million, accounting for 0.1% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $20.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism encompass Peter Franklin Palmedo’s Sun Valley Gold, Israel Englander’s Millennium Management and John Paulson’s Paulson & Co.
Since IAMGOLD Corporation (NYSE:IAG) has witnessed falling interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest stake of the 700 funds watched by Insider Monkey, worth close to $2.8 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund cut about $0 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as IAMGOLD Corporation (NYSE:IAG) but similarly valued. These stocks are Arco Platform Limited (NASDAQ:ARCE), Badger Meter, Inc. (NYSE:BMI), Tronox Holdings plc (NYSE:TROX), and National Storage Affiliates Trust (NYSE:NSA). All of these stocks’ market caps resemble IAG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARCE | 11 | 40688 | 1 |
| BMI | 14 | 117027 | 2 |
| TROX | 24 | 225222 | -2 |
| NSA | 16 | 93854 | -1 |
| Average | 16.25 | 119198 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $149 million in IAG’s case. Tronox Holdings plc (NYSE:TROX) is the most popular stock in this table. On the other hand Arco Platform Limited (NASDAQ:ARCE) is the least popular one with only 11 bullish hedge fund positions. IAMGOLD Corporation (NYSE:IAG) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately IAG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); IAG investors were disappointed as the stock returned -13.3% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
