During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Randgold Resources Ltd. (NASDAQ:GOLD) and see how the stock is affected by the recent hedge fund activity.
Randgold Resources Ltd. (NASDAQ:GOLD) was in 18 hedge funds’ portfolios at the end of September. GOLD has experienced an increase in activity from the world’s largest hedge funds of late. There were 11 hedge funds in our database with GOLD positions at the end of the previous quarter. Our calculations also showed that GOLD 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.
Let’s review the recent hedge fund action surrounding Randgold Resources Ltd. (NASDAQ:GOLD).
What does the smart money think about Randgold Resources Ltd. (NASDAQ:GOLD)?
Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 64% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GOLD over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the number one position in Randgold Resources Ltd. (NASDAQ:GOLD). Renaissance Technologies has a $143.1 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Paulson & Co, managed by John Paulson, which holds a $29.8 million position; 0.6% of its 13F portfolio is allocated to the company. Some other peers that are bullish comprise John Overdeck and David Siegel’s Two Sigma Advisors, Israel Englander’s Millennium Management and Noam Gottesman’s GLG Partners.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. GLG Partners, managed by Noam Gottesman, established the largest position in Randgold Resources Ltd. (NASDAQ:GOLD). GLG Partners had $13.1 million invested in the company at the end of the quarter. Andy Redleaf’s Whitebox Advisors also initiated a $10.3 million position during the quarter. The following funds were also among the new GOLD investors: Ian Cumming and Joseph Steinberg’s Leucadia National, Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Randgold Resources Ltd. (NASDAQ:GOLD) but similarly valued. These stocks are Hanesbrands Inc. (NYSE:HBI), Amneal Pharmaceuticals, Inc. (NYSE:AMRX), Aluminum Corp. of China Limited (NYSE:ACH), and Catalent Inc (NYSE:CTLT). This group of stocks’ market values are closest to GOLD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBI | 18 | 550463 | -7 |
| AMRX | 11 | 177982 | -2 |
| ACH | 2 | 6554 | -1 |
| CTLT | 23 | 401195 | 8 |
| Average | 13.5 | 284049 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $274 million in GOLD’s case. Catalent Inc (NYSE:CTLT) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 2 bullish hedge fund positions. Randgold Resources Ltd. (NASDAQ:GOLD) 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. In this regard CTLT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
