While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Paramount Gold Nevada Corp. (NYSE:PZG).
Paramount Gold Nevada Corp. (NYSE:PZG) was in 3 hedge funds’ portfolios at the end of September. 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. PZG has seen an increase in hedge fund interest of late. There were 2 hedge funds in our database with PZG positions at the end of the second quarter. Our calculations also showed that PZG 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Eric Sprott of Sprott Asset Management
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. 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. With all of this in mind let’s view the latest hedge fund action regarding Paramount Gold Nevada Corp. (NYSE:PZG).
What have hedge funds been doing with Paramount Gold Nevada Corp. (NYSE:PZG)?
Heading into the fourth quarter of 2020, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PZG over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Paramount Gold Nevada Corp. (NYSE:PZG), with a stake worth $0.3 million reported as of the end of September. Trailing Renaissance Technologies was Weiss Asset Management, which amassed a stake valued at $0.2 million. Sprott Asset Management was 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 Weiss Asset Management allocated the biggest weight to Paramount Gold Nevada Corp. (NYSE:PZG), around 0.01% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 0.0041 percent of its 13F equity portfolio to PZG.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Sprott Asset Management, managed by Eric Sprott, established the most valuable position in Paramount Gold Nevada Corp. (NYSE:PZG). Sprott Asset Management had $0.1 million invested in the company at the end of the quarter.
Let’s check out hedge fund activity in other stocks similar to Paramount Gold Nevada Corp. (NYSE:PZG). These stocks are UTStarcom Holdings Corp (NASDAQ:UTSI), ICC Holdings, Inc. (NASDAQ:ICCH), Ark Restaurants Corp. (NASDAQ:ARKR), Usio, Inc. (NASDAQ:USIO), FlexShopper, Inc. (NASDAQ:FPAY), Newater Technology, Inc. (NASDAQ:NEWA), and TransAct Technologies Incorporated (NASDAQ:TACT). This group of stocks’ market valuations are closest to PZG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UTSI | 3 | 1346 | 2 |
| ICCH | 3 | 1174 | 0 |
| ARKR | 1 | 1003 | 0 |
| USIO | 1 | 353 | -1 |
| FPAY | 1 | 860 | 0 |
| NEWA | 1 | 68 | 0 |
| TACT | 4 | 5198 | 0 |
| Average | 2 | 1429 | 0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in PZG’s case. TransAct Technologies Incorporated (NASDAQ:TACT) is the most popular stock in this table. On the other hand Ark Restaurants Corp. (NASDAQ:ARKR) is the least popular one with only 1 bullish hedge fund positions. Paramount Gold Nevada Corp. (NYSE:PZG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PZG is 69.3. 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 positive signal but 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 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately PZG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PZG were disappointed as the stock returned -12.4% since the end of September (through 11/23) 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 many of these stocks already outperformed the market so far this year.
Follow Paramount Gold & Silver Corp. (TSE:PZG)
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Disclosure: None. This article was originally published at Insider Monkey.