This Metric Says You Are Smart to Buy Primero Mining Corp (PPP)

Primero Mining Corp (NYSE:PPP) was in 7 hedge funds’ portfolio at the end of the fourth quarter of 2012. PPP investors should pay attention to an increase in enthusiasm from smart money recently. There were 6 hedge funds in our database with PPP holdings at the end of the previous quarter.

To most investors, hedge funds are seen as worthless, outdated investment tools of yesteryear. While there are greater than 8000 funds in operation at the moment, we hone in on the crème de la crème of this club, about 450 funds. Most estimates calculate that this group controls the majority of the hedge fund industry’s total capital, and by monitoring their top picks, we have uncovered a number of investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year 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 trumped the S&P 500 index by 24 percentage points in 7 months (see the details here).

Just as important, positive insider trading sentiment is another way to break down the world of equities. There are lots of incentives for an insider to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Many empirical studies have demonstrated the market-beating potential of this tactic if shareholders know what to do (learn more here).

With these “truths” under our belt, it’s important to take a peek at the key action surrounding Primero Mining Corp (NYSE:PPP).

What have hedge funds been doing with Primero Mining Corp (NYSE:PPP)?

In preparation for this year, a total of 7 of the hedge funds we track held long positions in this stock, a change of 17% from the previous quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, Eric Sprott’s Sprott Asset Management had the most valuable position in Primero Mining Corp (NYSE:PPP), worth close to $10.2 million, comprising 1.2% of its total 13F portfolio. The second largest stake is held by Peter Franklin Palmedo of Sun Valley Gold, with a $6.9 million position; 0.4% of its 13F portfolio is allocated to the company. Other hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Joel Greenblatt’s Gotham Asset Management.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Sprott Asset Management, managed by Eric Sprott, created the largest position in Primero Mining Corp (NYSE:PPP). Sprott Asset Management had 10.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.1 million position during the quarter.

How have insiders been trading Primero Mining Corp (NYSE:PPP)?

Insider buying is best served when the company in focus has seen transactions within the past 180 days. Over the last half-year time frame, Primero Mining Corp (NYSE:PPP) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Primero Mining Corp (NYSE:PPP). These stocks are DRDGOLD Ltd. (ADR) (NYSE:DRD), Banro Corporation (USA) (NYSEAMEX:BAA), Golden Star Resources Ltd. (USA) (NYSEAMEX:GSS), Timmins Gold Corp (NYSEAMEX:TGD), and Tanzanian Royalty Exploration Corp. (US) (NYSEAMEX:TRX). This group of stocks belong to the gold industry and their market caps resemble PPP’s market cap.

With the returns demonstrated by our studies, everyday investors should always pay attention to hedge fund and insider trading sentiment, and Primero Mining Corp (NYSE:PPP) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds