At Insider Monkey, we pore over the filings of nearly 887 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 December 31st. In this article, we will use that wealth of knowledge to determine whether or not Pan American Silver Corp. (NASDAQ:PAAS) makes for a good investment right now.
Is PAAS stock a buy? Pan American Silver Corp. (NASDAQ:PAAS) was in 27 hedge funds’ portfolios at the end of December. The all time high for this statistic is 30. PAAS investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 28 hedge funds in our database with PAAS positions at the end of the third quarter. Our calculations also showed that PAAS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 analyze the fresh hedge fund action encompassing Pan American Silver Corp. (NASDAQ:PAAS).
Do Hedge Funds Think PAAS Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. By comparison, 30 hedge funds held shares or bullish call options in PAAS a year ago. 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, Slate Path Capital held the most valuable stake in Pan American Silver Corp. (NASDAQ:PAAS), which was worth $119 million at the end of the fourth quarter. On the second spot was Sprott Asset Management which amassed $102 million worth of shares. Renaissance Technologies, Arrowstreet Capital, and Citadel Investment Group 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 Sloane Robinson Investment Management allocated the biggest weight to Pan American Silver Corp. (NASDAQ:PAAS), around 20.5% of its 13F portfolio. Brightlight Capital is also relatively very bullish on the stock, designating 8.23 percent of its 13F equity portfolio to PAAS.
Judging by the fact that Pan American Silver Corp. (NASDAQ:PAAS) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few hedge funds that elected to cut their full holdings heading into Q1. It’s worth mentioning that Jonathan Savitz’s Greywolf Capital Management said goodbye to the largest investment of all the hedgies followed by Insider Monkey, valued at close to $9.6 million in stock, and Suzi Nutton (CEO)’s Lansdowne Partners was right behind this move, as the fund dumped about $6.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q1.
Let’s go over hedge fund activity in other stocks similar to Pan American Silver Corp. (NASDAQ:PAAS). These stocks are Signature Bank (NASDAQ:SBNY), East West Bancorp, Inc. (NASDAQ:EWBC), The Middleby Corporation (NASDAQ:MIDD), TG Therapeutics Inc (NASDAQ:TGTX), Lumentum Holdings Inc (NASDAQ:LITE), Vornado Realty Trust (NYSE:VNO), and Ares Capital Corporation (NASDAQ:ARCC). All of these stocks’ market caps are closest to PAAS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBNY | 28 | 571010 | -7 |
| EWBC | 24 | 403705 | 4 |
| MIDD | 30 | 313117 | 0 |
| TGTX | 38 | 1311739 | 8 |
| LITE | 39 | 545949 | -1 |
| VNO | 23 | 178548 | 3 |
| ARCC | 15 | 102905 | -7 |
| Average | 28.1 | 489568 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $490 million. That figure was $467 million in PAAS’s case. Lumentum Holdings Inc (NASDAQ:LITE) is the most popular stock in this table. On the other hand Ares Capital Corporation (NASDAQ:ARCC) is the least popular one with only 15 bullish hedge fund positions. Pan American Silver Corp. (NASDAQ:PAAS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PAAS is 56. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately PAAS wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PAAS investors were disappointed as the stock returned -3.4% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.
