Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active 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 failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Vale SA (NYSE:VALE) in this article.
Is VALE a good stock to buy? Vale SA (NYSE:VALE) has seen an increase in hedge fund sentiment lately. Vale SA (NYSE:VALE) was in 35 hedge funds’ portfolios at the end of September. The all time high for this statistic is 36. There were 29 hedge funds in our database with VALE positions at the end of the second quarter. Our calculations also showed that VALE 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.
Howard Marks of Oaktree Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 we’re going to view the latest hedge fund action encompassing Vale SA (NYSE:VALE).
Do Hedge Funds Think VALE Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in VALE over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Vale SA (NYSE:VALE). Fisher Asset Management has a $424.7 million position in the stock, comprising 0.4% of its 13F portfolio. On Fisher Asset Management’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $267.9 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism consist of Martin Taylor’s Crake Asset Management, Cliff Asness’s AQR Capital Management and Jon Bauer’s Contrarian Capital. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Vale SA (NYSE:VALE), around 38.41% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, designating 10.45 percent of its 13F equity portfolio to VALE.
Consequently, key hedge funds were breaking ground themselves. Oaktree Capital Management, managed by Howard Marks, initiated the biggest position in Vale SA (NYSE:VALE). Oaktree Capital Management had $46.1 million invested in the company at the end of the quarter. Robert Bishop’s Impala Asset Management also initiated a $19.7 million position during the quarter. The other funds with brand new VALE positions are David Halpert’s Prince Street Capital Management, David Kowitz and Sheldon Kasowitz’s Indus Capital, and John Horseman’s Horseman Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Vale SA (NYSE:VALE) but similarly valued. These stocks are ABB Ltd (NYSE:ABB), U.S. Bancorp (NYSE:USB), Mercadolibre Inc (NASDAQ:MELI), Global Payments Inc (NYSE:GPN), Northrop Grumman Corporation (NYSE:NOC), Chubb Limited (NYSE:CB), and Dollar General Corp. (NYSE:DG). All of these stocks’ market caps match VALE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ABB | 13 | 404542 | 3 |
| USB | 48 | 6225793 | 0 |
| MELI | 81 | 5769607 | 21 |
| GPN | 57 | 4698299 | -9 |
| NOC | 42 | 843121 | -5 |
| CB | 45 | 1396414 | 5 |
| DG | 56 | 1824156 | -11 |
| Average | 48.9 | 3023133 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.9 hedge funds with bullish positions and the average amount invested in these stocks was $3023 million. That figure was $1628 million in VALE’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 13 bullish hedge fund positions. Vale SA (NYSE:VALE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VALE is 55.3. 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. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on VALE as the stock returned 64.2% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
