Should You Buy Agnico-Eagle Mines Limited (USA) (AEM)?

Is Agnico-Eagle Mines Limited (USA) (NYSE:AEM) a first-rate investment now? The smart money is becoming more confident. The number of long hedge fund positions advanced by 2 in recent months.

To most market participants, hedge funds are viewed as unimportant, old financial vehicles of years past. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey look at the bigwigs of this group, about 450 funds. It is estimated that this group oversees the lion’s share of all hedge funds’ total capital, and by keeping an eye on their highest performing stock picks, we have brought to light a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as key, bullish insider trading sentiment is another way to break down the investments you’re interested in. There are lots of motivations for an insider to sell shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the impressive potential of this strategy if you know what to do (learn more here).

Consequently, let’s take a peek at the recent action surrounding Agnico-Eagle Mines Limited (USA) (NYSE:AEM).

How have hedgies been trading Agnico-Eagle Mines Limited (USA) (NYSE:AEM)?

At the end of the first quarter, a total of 25 of the hedge funds we track were bullish in this stock, a change of 9% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably.

According to our comprehensive database, First Eagle Investment Management, managed by Jean-Marie Eveillard, holds the biggest position in Agnico-Eagle Mines Limited (USA) (NYSE:AEM). First Eagle Investment Management has a $463.6 million position in the stock, comprising 1.5% of its 13F portfolio. The second largest stake is held by Jeffrey Vinik of Vinik Asset Management, with a $65.6 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other hedgies that are bullish include John Paulson’s Paulson & Co, Jim Simons’s Renaissance Technologies and Gilchrist Berg’s Water Street Capital.

Consequently, key hedge funds were leading the bulls’ herd. Highfields Capital Management, managed by Jonathon Jacobson, assembled the most valuable position in Agnico-Eagle Mines Limited (USA) (NYSE:AEM). Highfields Capital Management had 9.9 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $8.6 million investment in the stock during the quarter. The other funds with brand new AEM positions are James H. Litinsky’s JHL Capital Group, D. E. Shaw’s D E Shaw, and Anthony Giammalva’s Sound Energy Partners.

Insider trading activity in Agnico-Eagle Mines Limited (USA) (NYSE:AEM)

Bullish insider trading is at its handiest when the company we’re looking at has experienced transactions within the past half-year. Over the latest 180-day time period, Agnico-Eagle Mines Limited (USA) (NYSE:AEM) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Agnico-Eagle Mines Limited (USA) (NYSE:AEM). These stocks are Gold Fields Limited (ADR) (NYSE:GFI), Randgold Resources Ltd. (ADR) (NASDAQ:GOLD), Franco-Nevada Corporation (NYSE:FNV), Eldorado Gold Corp (USA) (NYSE:EGO), and Compania de Minas Buenaventura SA (ADR) (NYSE:BVN). All of these stocks are in the gold industry and their market caps resemble AEM’s market cap.

With the returns demonstrated by our time-tested strategies, retail investors should always keep an eye on hedge fund and insider trading activity, and Agnico-Eagle Mines Limited (USA) (NYSE:AEM) is no exception.

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