We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Hedge fund interest in Newmont Mining Corp (NYSE:NEM) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Canadian Pacific Railway Limited (NYSE:CP), Royal Bank of Scotland Group plc (NYSE:RBS), and Randgold Resources Ltd. (NASDAQ:GOLD) to gather more data points. Our calculations also showed that NEM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a peek at the recent hedge fund action regarding Newmont Mining Corp (NYSE:NEM).
What have hedge funds been doing with Newmont Mining Corp (NYSE:NEM)?
Heading into the fourth quarter of 2019, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NEM over the last 17 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in Newmont Mining Corp (NYSE:NEM) was held by Renaissance Technologies, which reported holding $275.6 million worth of stock at the end of September. It was followed by GLG Partners with a $91 million position. Other investors bullish on the company included International Value Advisers, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Anchor Bolt Capital allocated the biggest weight to Newmont Mining Corp (NYSE:NEM), around 6% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, setting aside 3.1 percent of its 13F equity portfolio to NEM.
Due to the fact that Newmont Mining Corp (NYSE:NEM) has faced falling interest from hedge fund managers, it’s easy to see that there was a specific group of funds that slashed their full holdings last quarter. It’s worth mentioning that Karim Abbadi and Edward McBride’s Centiva Capital dropped the biggest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $8.7 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $4.6 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Newmont Mining Corp (NYSE:NEM). We will take a look at Canadian Pacific Railway Limited (NYSE:CP), Royal Bank of Scotland Group plc (NYSE:RBS), Randgold Resources Ltd. (NASDAQ:GOLD), and Credit Suisse Group AG (NYSE:CS). All of these stocks’ market caps resemble NEM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CP | 31 | 1781495 | 1 |
| RBS | 5 | 29381 | -1 |
| GOLD | 42 | 1443824 | 3 |
| CS | 14 | 226949 | 3 |
| Average | 23 | 870412 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $870 million. That figure was $868 million in NEM’s case. Randgold Resources Ltd. (NASDAQ:GOLD) is the most popular stock in this table. On the other hand Royal Bank of Scotland Group plc (NYSE:RBS) is the least popular one with only 5 bullish hedge fund positions. Newmont Mining Corp (NYSE:NEM) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately NEM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NEM were disappointed as the stock returned 25.5% in 2019 (through December 23rd) 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
