In this article, we shall discuss the top 10 zinc stocks picked by hedge funds for 2022.
Zinc is one of the most valuable metals in the modern economy. The steel industry utilizes zinc to galvanize steel and insulate it from weather and corrosion. The metal is also used in the production of brass and bronze, as well as die-casting to make numerous metal products. Furthermore, zinc is also essential to increase crop yield and quality, and is an important nutrient for human development and disease prevention. Zinc prices have touched a thirteen-year high in 2022, which marks a stunning 90% surge off the bottom earlier in the year. The prices have primarily shot up due to Russia’s invasion of Ukraine in 2022, which has disrupted global supply chain and have boosted commodity prices, causing inflation to skyrocket.
Despite this, zinc does not garner much attention from investors. It is a tough segment of the precious metals industry because there are little to no primary zinc producers that trade on major exchanges. However, there is still considerable profit potential buried within the sector and with zinc currently on the rise, despite the macroeconomic pressures and geo-political turbulence, it could provide some relief to investors crushed by the impending recession.
Demand For Zinc Driven By Demand For Infrastructure
Zinc prices have surged more than 92% since January 2016. According to a report by McKinsey, zinc demand is directly proportional to demand for infrastructure. As city populations continue to rise, there is an alarming need to expand urban infrastructure to tend to the rising demand. This is what Bill Williams, COO of Canada-based Zinc One Resources, had to say about the relevance of zinc within the expanding construction and infrastructural market:
“The most important application for zinc is in galvanizing steel. The emerging markets will need to invest in infrastructure as they grow their economies. They will need zinc for that, but will have to compete with the new infrastructure needs of China, the US and India — who all have major infrastructure plans underway.”
China is currently the world’s largest producer of zinc at more than 6 million tonnes every year, which is thrice the amount of the world’s second largest producer, Peru. China is also the global leader in infrastructure, dedicating more investment into the construction industry than the United States and Europe combined. In 2021, China invested more than $3.6 trillion in infrastructure, and that number is increasing exponentially every year. China’s policy of urbanization is the primary driver of its economic growth, considering the fact that between 1990 and 2022, the proportion of China’s urban population has jumped from 26% to 56%. In other emerging economies like India, Peru and Bangladesh, a similar proportionality between zinc consumption and infrastructure expansion can be seen.
Some of the most prominent players in the zinc industry are Teck Resources (NYSE:TECK), Vedanta Resources Ltd. (NYSE:VEDL), and Newmont Corporation (NYSE:NEM). However, in this article, we shall only be going through the top 10 zinc stocks picked by hedge funds for 2022.
Our Methodology
For this article, we looked at Insider Monkey’s extensive database tracking 895 elite hedge funds as of Q2 2022. We then chose the top 10 zinc stocks most popular with the hedge funds. We ranked the stocks based on the number of hedge funds which held stakes in them, from lowest to highest. We also mentioned some of the most popular shareholders in the respective stocks.
Top 10 Zinc Stocks Picked By Hedge Funds for 2022
10. Eldorado Gold Corporation (NYSE:EGO)
Number of Hedge Fund Holdings: 13
Based in Vancouver, British Columbia, Eldorado Gold Corporation (NYSE:EGO) is a Canadian mining company which primarily deals in gold. However, in addition to gold, the company also mines lead, silver, and zinc. The company posted excellent Q2 2022 production results, delivering a gold production of 113,500 ounces. Although the figures declined 2% from the preceding year, it is pertinent to note that this was largely due to a slow start to 2022 for the company’s Kisladag gold deposit. Kisladag production is expected to return to normal in Q3 2022, well above the quarterly 30,000 ounce mark. Like Teck Resources (NYSE:TECK), Vedanta Resources Ltd., and Newmont Corporation (NYSE:NEM), Eldorado Gold Corporation is one of the top zinc stocks picked by hedge funds in 2022.
On October 19, Stifel analyst Ingrid Rico lowered the price target on Eldorado Gold Corporation to $12.38 from $13.11, maintaining a Buy rating on the shares. The analyst notes that the company has a market cap of $1.05 billion as of October 19, which is significantly less than the NPV of its two key assets, the Kisladag and Lamaque gold deposits. This awards the company an extremely low valuation of $5.80 as of October 19. Even after subtracting an estimated $320 million in corporate G&A and using a conservative P/NAV multiple of 0.8, the analyst sees a fair value closer to $13 per share. Hence, there is a 100% upside to the stock, making it one of the best undervalued stocks in the industry currently.
9. Coeur Mining Inc. (NYSE:CDE)
Number of Hedge Fund Holdings: 14
Based in Chicago, Illinois, Coeur Mining Inc. (NYSE:CDE) is an American mining company which specializes in mining different precious metals including silver, lead and zinc. As of the second quarter of 2022, investor interest around the stock declined, with 14 hedge funds long the stock in Q2 2022, as compared to 20 hedge funds in the preceding quarter. As of Q2 2022, D.E. Shaw is the largest shareholder in the company, owning more than 5.36 million shares worth $16.31 million.
The Coeur Mining Inc. posted a total revenue of $204.12 million in Q2 2022, representing a 5% decrease year-over-year. In the second quarter of 2022, the Coeur Mining posted an EPS of -$0.05, trailing estimates of $0 by -$0.05. Despite this, the company delivered strong gold production growth, and with gold sales representing more than 70% of the company’s revenues, Coeur’s (NYSE:CDE) expansion remains on-track with regards to estimated schedule and cost.
In a conference call on October 1, the company’s CEO Mitch Krebs claimed:
“Three of our four operating mines delivered strong production growth compared to the first quarter. Solid metal sales, coupled with some positive changes in working capital led to a strong rebound in quarterly operating cash flow as well. As we look toward the second half of the year, our operations remain on track to achieve our full year production guidance.”
8. Hecla Mining (NYSE:HL)
Number of Hedge Fund Holdings: 16
Based in Coeur d’Alene, Idaho, Hecla Mining (NYSE:HL) is a mining company which primarily focuses on gold and silver. It is the third largest global producer of lead and zinc. The company increased its zinc reserves in 2022 by more than 7%. In the second quarter of 2022, the company posted a total revenue of $191.24 million and beat EPS estimates of $0.02, posting earnings of $0.04 per share. Hedge fund sentiment around the stock took a hit, with 16 funds long the stock in Q2 2022, down from 20 in the preceding quarter.
On October 19, Canaccord analyst Dalton Baretto upgraded Hecla Mining to Buy from Hold with a price target of $5, up from $4.75. The analyst attributed the upgrade to the company’s recent string of robust operating performance as well as predicted growth from the Keno Hill initiative. The shares continue to trade at a significant premium to intermediate precious metal producer peers, which the analyst chalks up to Hecla’s (NYSE:HL) significant retail following in the United States. Like Teck Resources (NYSE:TECK), Vedanta Resources Ltd., and Newmont Corporation (NYSE:NEM), Hecla Mining is one of the most prominent players in the zinc industry.
7. Southern Copper Corporation (NYSE:SCCO)
Number of Hedge Fund Holdings: 17
Based in Mexico City, Southern Copper Corp. (NYSE:SCCO) is a Mexican mining company which ranks among the world’s largest miners of molybdenum, silver, and zinc. Investor interest around Southern Copper Corp. increased in the second quarter of 2022, with 17 hedge funds having stakes worth $274.8 million in the company. This was up from 16 hedge funds which were long the stock in Q1 2022. Ken Fisher’s fund is the largest shareholder in Southern Copper Corp. as of Q2 2022, with a total stake value of $178.36 million.
On September 19, Morgan Stanley analyst Carlos De Alba upgraded Southern Copper to Equal Weight from Underweight with a price target of $55, up from $51, citing Southern’s (NYSE:SCCO) cheap valuation for the upgrade. The analyst contends that there has been a resurgence of value within America’s metals and mining sector, although there is still some residual uncertainty that remains. The analyst selectively upgraded many names in the industry, including prominent players like Teck Resources (NYSE:TECK), Vedanta Resources Ltd., and Newmont Corporation (NYSE:NEM). The upgrades reflect exposure to deep value and/or self-help stories, amid macroeconomic turbulence and question marks over a resurgence by China.
6. Hudbay Minerals Inc. (NYSE:HBM)
Number of Hedge Fund Holdings: 19
Headquartered in Toronto, Ontario, Hudbay Minerals Inc. (NYSE:HBM) is a diversified Canadian mining company which primarily focuses on the production of copper concentrate and zinc metal. In 2021, the company churned out 121,106 tonnes of zinc. On September 18, Credit Suisse analyst Fahad Tariq lowered the price target on Hudbay Minerals Inc. to $5.08 from $5.44, keeping an Outperform rating on the shares. The analyst has predicted an increasing demand for copper in the next ten years, making the company an excellent investment choice for the next copper bull market. Company operations are substantially exposed to copper and so with macroeconomic pressures and higher inflation not posing any significant risk, the stock is ideal for the long-term investor. However, the analyst cautions that there is still probability that the near future might develop differently than expected.
In the second quarter of 2022, Hudbay Minerals Inc. managed to maintain investor interest, with 19 hedge funds long the stock in both, Q1 and Q2 of 2022. Robert Richards’ Heathbridge Capital Management is the largest stakeholder in Hudbay Minerals Inc., owning 3.72 million shares worth $14.97 million. Furthermore, in Q2 2022, the company met estimates by posting earnings of $0.12 per share. Total revenue stood at $415.45 million in the second quarter of 2022.
5. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Holdings: 24
Based in London, UK, Rio Tinto Group (NYSE:RIO) is an Anglo-Australian multinational metals and mining company. It is the second-largest mining corporation in the world and in 1962, merged with Consolidated Zinc to form the Rio Tinto – Zinc Corporation and its main subsidiary, Conzinc Riotinto of Australia.
On October 19, JPMorgan analyst Lyndon Fagan raised the price target on Rio Tinto Group to $6113.32 from $6079.86, maintaining a Neutral rating on the shares. The analyst contends that the new management which has taken charge of the company has not been able to change the overall attitude towards corporate sustainability which had prospered within the company for years. This, combined with the rise in global tensions and macroeconomic pressures, has increased operational risk for the mining mammoth. However, the analyst also ascertains that the company is currently in a bull cycle and is expected to continue on its current growth trajectory.
As of Q2 2022, Rio Tinto is big on dividends to shareholders, having an annual dividend yield of 10.50% and a quarterly dividend of $1.50 per share. In Q2 2022, the company delivered an underlying EBITDA of $15.6 billion and a total revenue of $60.2 billion. Hedge fund sentiment around Rio Tinto Group took a hit, with 24 hedge funds long the stock in Q2 2022, down from 26 in the preceding quarter.
4. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Holdings: 27
One of the largest logistics operators in Brazil, Vale S.A. (NYSE:VALE) is a multinational corporation engaged in metals and mining of iron ore, nickel, manganese, copper, and zinc. The company is based in Rio De Janeiro, and as of October 19, has a market cap of $61.2 billion. In Q2 2022, Vale S.A. posted an EPS of $1.32, beating estimates of $0.81 by $0.51. Moreover, the company generated a total revenue of $11.16 billion in Q2 2022. Vale S.A. managed to maintain investor interest in Q2 2022, with 27 hedge funds having stakes in the company in both, Q1 and Q2 of 2022.
On October 5, Deutsche Bank analyst Liam Fitzpatrick lowered the price target on Vale S.A. to $19 from $20, keeping a Hold rating on the shares. The reduced target prices on metals and mining stocks was to reflect weakening demand and macroeconomic risks and while the analyst sees downside risks near-term, he contends that metal equities have already been priced in a mild recession. He predicts that when the global cycle is restored, the market will be faced with structurally tight supply and prices would once again rise to levels which would provide incentive to investors.
Here is what GMO LLC had to say about Vale S.A. in their Q1 2022 investor letter:
“Let’s look at Vale (NYSE:VALE), the world’s largest iron ore producer, as a case study for how shareholders can be rewarded. Vale’s stock price is about where it was at the beginning of last year. Despite the market’s lack of enthusiasm, the company generated about $20 billion of free cash flow last year. Not bad for a company with a market cap of a little over $100 billion and no substantive debt as of the end of March. 4 What did the company do with all that cash? Last year, Vale paid out about $9 billion in regularly scheduled dividends and distributed another $10 billion between extra dividends and share repurchases. Combined with dividends distributed in the first quarter of this year and a recently announced share repurchase, Vale has returned or announced the return of over $33 billion since the beginning of last year, almost a 32% yield relative to the market cap of the company. Not a bad way to win.”
3. Wheaton Precious Metals Corp. (NYSE:WPM)
Number of Hedge Fund Holdings: 27
Based in Vancouver, Wheaton Precious Metals (NYSE:WPM) is a Canadian multinational precious metals streaming company and focuses on the production of streaming of silver, lead, copper and zinc. On September 12, Goldman Sachs analyst Emily Chieng initiated coverage of Wheaton Precious Metals with a Buy rating and a $38.33 price target. According to the analyst, the company’s recent stream acquisitions will generate stronger free cash flow, underpinning increased potential for capital returns. The analyst contends that of all the players in the precious metals streaming sector, Wheaton Precious Metals provides the greatest exposure to precious metals.
As of the second quarter of 2022, Wheaton Precious Metals posted earnings of $0.33 per share, beating estimates of $0.32 by $0.01. Investor interest around the stock declined slightly in Q2 2022, with 27 hedge funds long the stock, down from 28 in the preceding quarter. As of Q2 2022, First Eagle Investment Management is the largest shareholder in Wheaton Precious Metals, having a total stake of $613.67 million. The company generated a total revenue of $302.92 million in Q2 2022.
2. Teck Resources Ltd. (NYSE:TECK)
Number of Hedge Fund Holdings: 46
Teck Resources Ltd. is a diversified natural resources company which is engaged in mining and mineral development, including coal for the steelmaking industry, copper, zinc, and energy. In 2021, the company produced more than 800,000 tonnes of zinc in concentrate and 420,000 tonnes of refined zinc. It is currently the world’s third largest producer of mined zinc. In Q2 2022, Teck Resources posted an EPS of $2.4, beating estimates of $2.26 by $0.15. The company is a dividend payer, with an annual dividend yield of 1.15% and a quarterly dividend amount of $0.09 per share.
On October 16, Stifel analyst Alex Terentiew raised the price target on Teck Resources to $44.12 from $42.67, maintaining a Buy rating on the shares. According to the analyst, the company is delivering stellar profits currently and though profits are expected to decline as the fears of a recession loom large, earnings are likely to maintain at about $5 next year. Copper production is set to rise and the weakening Canadian currency will lower costs. Moreover, the government incentives may keep steel and coal prices more favorable than some expect. The declining cap-ex, rising production, depleted share price of $32.99 as of October 20, and further tailwinds from energy and zinc, have all contributed to the analyst’s Buy rating on Teck Resources.
1. Newmont Corp. (NYSE:NEM)
Number of Hedge Fund Holdings: 56
Based in Greenwood Village, Colorado, Newmont Corporation is an American mining company which engages in the production of gold, copper, silver, zinc, and lead. It is the largest gold mining corporation in the world. Newmont Corporation is spending $500 million per year on renewable energy projects through 2025 to reduce carbon emissions by 30% by 2030. Hedge fund sentiment around Newmont Corporation turned favorable in Q2 2022, with 56 hedge funds having stakes worth $2.92 billion. This was up from 53 hedge funds in Q1 2022, which had stakes valued at $3.53 billion. As of Q2 2022, Heathbridge Capital Management is the largest shareholder in the stock, owning more than 0.52 million shares worth $21.75 million.
On September 12, Goldman Sachs analyst Emily Chieng initiated coverage of Newmont Corporation with a Buy rating and a $53 price target. According to the analyst, the stock’s cheap valuation creates the ideal entry point for low-risk investors. The analyst noted above-peer production growth for the company through 2026 with the commencement of development projects including Ahafo North, Tanami Expansion 2, and Yanacocha Sulfides in the next 2-4 years.
Here is what First Eagle Investment Management had to say about Newmont Corporation in their Q3 2021 investor letter:
“The largest gold miner in the world, Newmont shares lost ground in what was a volatile and ultimately down quarter for the price of gold. The Colorado-based company has continued to execute well in what has been a challenging environment. The company recently reaffirmed its full-year 2021 production guidance, but indicated that it was likely to come in at the mid to low point of the range provided as a result of disruptions from Covid-19 as well as severe weather events. It also noted that inflation pressures were likely to push its costs higher in 2021. None of this changes our opinion of the stock, which has historically offered steady production anchored in good jurisdictions, a good pipeline of organic projects, a strong balance sheet and proven management.”
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