We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Silvercorp Metals Inc. (NYSE:SVM).
Silvercorp Metals Inc. (NYSE:SVM) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of the second quarter of 2019. 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 VirnetX Holding Corporation (NYSE:VHC), Landmark Infrastructure Partners LP (NASDAQ:LMRK), and New Frontier Corp (NYSE:NFC) to gather more data points. Our calculations also showed that SVM isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We’re going to check out the key hedge fund action encompassing Silvercorp Metals Inc. (NYSE:SVM).
How are hedge funds trading Silvercorp Metals Inc. (NYSE:SVM)?
At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in SVM over the last 16 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the most valuable position in Silvercorp Metals Inc. (NYSE:SVM). Renaissance Technologies has a $9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $3.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Eric Sprott’s Sprott Asset Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and John Overdeck and David Siegel’s Two Sigma Advisors.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the second quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Silvercorp Metals Inc. (NYSE:SVM) but similarly valued. We will take a look at VirnetX Holding Corporation (NYSE:VHC), Landmark Infrastructure Partners LP (NASDAQ:LMRK), New Frontier Corp (NYSE:NFC), and Insteel Industries Inc (NASDAQ:IIIN). All of these stocks’ market caps resemble SVM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VHC | 3 | 555 | 1 |
| LMRK | 4 | 2441 | -1 |
| NFC | 12 | 56016 | -1 |
| IIIN | 6 | 44459 | -2 |
| Average | 6.25 | 25868 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $19 million in SVM’s case. New Frontier Corp (NYSE:NFC) is the most popular stock in this table. On the other hand VirnetX Holding Corporation (NYSE:VHC) is the least popular one with only 3 bullish hedge fund positions. Silvercorp Metals Inc. (NYSE:SVM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on SVM as the stock returned 58.1% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
