Should You Avoid Eldorado Gold Corp (USA) (EGO)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Eldorado Gold Corp (USA) (NYSE:EGO).

Eldorado Gold Corp (USA) (NYSE:EGO) investors should pay attention to a decrease in hedge fund interest in recent months. 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 RLI Corp. (NYSE:RLI), Medical Properties Trust, Inc. (NYSE:MPW), and Gerdau SA (ADR) (NYSE:GGB) to gather more data points.

Keeping this in mind, we’re going to check out the new action regarding Eldorado Gold Corp (USA) (NYSE:EGO).

What does the smart money think about Eldorado Gold Corp (USA) (NYSE:EGO)?

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Eldorado Gold Corp (USA) (NYSE:EGO). AQR Capital Management has a $16 million position in the stock, comprising less than 0.1% of its 13F portfolio. On AQR Capital Management’s heels is Jim Simons of Renaissance Technologies, with a $5.5 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions include Israel Englander’s Millennium Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. and Ray Dalio’s Bridgewater Associates.

Judging by the fact that Eldorado Gold Corp (USA) (NYSE:EGO) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there exists a select few funds that elected to cut their entire stakes heading into Q4. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest position of all the hedgies watched by Insider Monkey, valued at about $0.2 million in stock. Jacob Gottlieb’s fund, Visium Asset Management, also sold off its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Eldorado Gold Corp (USA) (NYSE:EGO) but similarly valued. We will take a look at RLI Corp. (NYSE:RLI), Medical Properties Trust, Inc. (NYSE:MPW), Gerdau SA (ADR) (NYSE:GGB), and Genworth Financial Inc (NYSE:GNW). All of these stocks’ market caps are closest to EGO’s market cap.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $55 million in EGO’s case. Genworth Financial Inc (NYSE:GNW) is the most popular stock in this table. On the other hand Medical Properties Trust, Inc. (NYSE:MPW) is the least popular one with only 10 bullish hedge fund positions. Eldorado Gold Corp (USA) (NYSE:EGO) 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 GNW might be a better candidate to consider a long position.