Is Royal Gold, Inc USA) (RGLD) A Good Stock To Buy?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about Royal Gold, Inc USA) (NASDAQ:RGLD) in this article.

Royal Gold, Inc USA) (NASDAQ:RGLD) was in 25 hedge funds’ portfolios at the end of September. Royal Gold, Inc USA) (NASDAQ:RGLD) has seen an increase in hedge fund interest recently. There were 18 hedge funds in our database with Royal Gold, Inc USA) (NASDAQ:RGLD) holdings at the end of the previous quarter. At the end of this article, we will also compare Royal Gold, Inc USA) (NASDAQ:RGLD) to other stocks, including WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX), MPLX LP (NYSE:MPLX), and American Eagle Outfitters (NYSE:AEO) to get a better sense of its popularity.

If you’d ask most investors, hedge funds are assumed to be unimportant, old financial vehicles of years past. While there are greater than 8000 funds trading at the moment, Our researchers look at the aristocrats of this group, approximately 700 funds. These investment experts command the majority of the hedge fund industry’s total capital, and by keeping an eye on their top investments, Insider Monkey has unearthed a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to take a look at the latest action encompassing Royal Gold, Inc USA) (NASDAQ:RGLD).

What does the smart money think about Royal Gold, Inc USA) (NASDAQ:RGLD)?

At the end of Q3, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 39% from the previous quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Horizon Asset Management, managed by Murray Stahl, holds the most valuable position in Royal Gold, Inc USA) (NASDAQ:RGLD). Horizon Asset Management has a $33.6 million position in the stock, comprising 0.6% of its 13F portfolio. On Horizon Asset Management’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $32.7 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish contain Israel Englander’s Millennium Management, Renaissance Technologies, and Jorge Paulo Lemann’s 3G Capital.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. 3G Capital, managed by Jorge Paulo Lemann, established the biggest position in Royal Gold, Inc USA) (NASDAQ:RGLD). 3G Capital had $11.7 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $7.4 million position during the quarter. The other funds with brand new Royal Gold, Inc USA) (NASDAQ:RGLD) positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Joel Greenblatt’s Gotham Asset Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Royal Gold, Inc USA) (NASDAQ:RGLD) but similarly valued. These stocks are WuXi PharmaTech (Cayman) Inc. (ADR) (NYSE:WX), MPLX LP (NYSE:MPLX), American Eagle Outfitters (NYSE:AEO), and Industrias Bachoco, S.A.B. de C.V. (ADR) (NYSE:IBA). All of these stocks’ market caps match Royal Gold, Inc USA) (NASDAQ:RGLD)’s market cap.

As you can see, these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $259 million. That figure was $354 million in Royal Gold, Inc USA) (NASDAQ:RGLD)’s case. American Eagle Outfitters (NYSE:AEO) is the most popular stock in this table. On the other hand, Industrias Bachoco, S.A.B. de C.V. (ADR) (NYSE:IBA) is the least popular one with only 5 bullish hedge fund positions. Royal Gold, Inc USA) (NASDAQ:RGLD) 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, American Eagle Outfitters (NYSE:AEO) might be a better candidate to consider a long position.