Rubicon Minerals Corp. (USA) (RBY): Are Hedge Funds Right About This Stock?

Is Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY) a healthy stock for your portfolio? Investors who are in the know are taking a bearish view. The number of bullish hedge fund positions dropped by 2 recently.

If you’d ask most market participants, hedge funds are perceived as unimportant, old financial vehicles of years past. While there are over 8000 funds trading at present, we hone in on the elite of this club, about 450 funds. It is widely believed that this group controls most of the hedge fund industry’s total capital, and by monitoring their top stock picks, we have identified a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Just as important, positive insider trading sentiment is another way to parse down the world of equities. As the old adage goes: there are many motivations for a bullish insider to drop shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the useful potential of this strategy if “monkeys” understand what to do (learn more here).

With all of this in mind, it’s important to take a look at the latest action encompassing Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY).

What does the smart money think about Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY)?

At year’s end, a total of 10 of the hedge funds we track were bullish in this stock, a change of -17% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially.

According to our comprehensive database, Greywolf Capital Management, managed by Jonathan Savitz, holds the biggest position in Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY). Greywolf Capital Management has a $23.4 million position in the stock, comprising 12.6% of its 13F portfolio. The second largest stake is held by Peter Franklin Palmedo of Sun Valley Gold, with a $18.7 million position; 1% of its 13F portfolio is allocated to the stock. Some other hedgies with similar optimism include Roberto Mignone’s Bridger Management, D. E. Shaw’s D E Shaw and Ranjan Tandon’s Libra Advisors.

Seeing as Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY) has witnessed a declination in interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds who sold off their entire stakes heading into 2013. Interestingly, John Fichthorn’s Dialectic Capital Management sold off the largest investment of the “upper crust” of funds we watch, comprising close to $3.6 million in stock. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds heading into 2013.

How have insiders been trading Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY)?

Insider purchases made by high-level executives is most useful when the primary stock in question has seen transactions within the past 180 days. Over the last half-year time period, Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Rubicon Minerals Corp. (USA) (NYSEAMEX:RBY). These stocks are Seabridge Gold, Inc. (USA) (NYSE:SA), Nevsun Resources (USA) (NYSEAMEX:NSU), Aurizon Mines Ltd. (USA) (NYSEAMEX:AZK), and Gold Resource Corporation (NYSEAMEX:GORO). This group of stocks are the members of the gold industry and their market caps match RBY’s market cap.