“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Osisko Gold Royalties Ltd (NYSE:OR) and see how it was affected.
Osisko Gold Royalties Ltd (NYSE:OR) has seen an increase in hedge fund interest lately. OR was in 10 hedge funds’ portfolios at the end of the third quarter of 2018. There were 6 hedge funds in our database with OR positions at the end of the previous quarter. Our calculations also showed that or isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to view the new hedge fund action regarding Osisko Gold Royalties Ltd (NYSE:OR).
What does the smart money think about Osisko Gold Royalties Ltd (NYSE:OR)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in OR at the beginning of this year. With hedge funds’ capital changing hands, 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, Jim Simons’s Renaissance Technologies has the most valuable position in Osisko Gold Royalties Ltd (NYSE:OR), worth close to $5.7 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Sun Valley Gold, managed by Peter Franklin Palmedo, which holds a $4.8 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Eric Sprott’s Sprott Asset Management.
As industrywide interest jumped, some big names have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the most valuable position in Osisko Gold Royalties Ltd (NYSE:OR). Two Sigma Advisors had $0.4 million invested in the company at the end of the quarter. Michael Platt and William Reeves’s BlueCrest Capital Mgmt. also initiated a $0.2 million position during the quarter. The other funds with new positions in the stock are George Zweig, Shane Haas and Ravi Chander’s Signition LP and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Osisko Gold Royalties Ltd (NYSE:OR). We will take a look at SecureWorks Corp. (NASDAQ:SCWX), Boulder Growth & Income Fund, Inc. (NYSE:BIF), ACCO Brands Corporation (NYSE:ACCO), and ATN International, Inc. (NASDAQ:ATNI). All of these stocks’ market caps are similar to OR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SCWX | 8 | 32331 | 2 |
| BIF | 4 | 7593 | -2 |
| ACCO | 21 | 49160 | 4 |
| ATNI | 8 | 70791 | 2 |
| Average | 10.25 | 39969 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $18 million in OR’s case. ACCO Brands Corporation (NYSE:ACCO) is the most popular stock in this table. On the other hand Boulder Growth & Income Fund, Inc. (NYSE:BIF) is the least popular one with only 4 bullish hedge fund positions. Osisko Gold Royalties Ltd (NYSE:OR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ACCO might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.