What Hedge Fund Sentiment Says about HudBay Minerals Inc (HBM)?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze HudBay Minerals Inc (NYSE:HBM).

HudBay Minerals Inc (NYSE:HBM) investors should be aware of a decrease in enthusiasm from smart money in recent months. However, 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 or drop in popularity but it may still be less or more popular than similarly-priced stocks. That’s why at the end of this article we will examine companies such as Emergent Biosolutions Inc (NYSE:EBS), 8Point3 Energy Partners LP (NASDAQ:CAFD), and Terreno Realty Corporation (NYSE:TRNO) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to review the new action encompassing HudBay Minerals Inc (NYSE:HBM).

What have hedge funds been doing with HudBay Minerals Inc (NYSE:HBM)?

Nine funds followed by Insider Monkey were long HudBay Minerals at the end of September, down by 25% over the quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Thomas E. Claugus’s GMT Capital has the number one position in HudBay Minerals Inc (NYSE:HBM), worth close to $63.2 million, comprising 1.3% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $11.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish encompass Ken Griffin’s Citadel Investment Group, Jim Simons’ Renaissance Technologies and Israel Englander’s Millennium Management.

Seeing as HudBay Minerals Inc (NYSE:HBM) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds who were dropping their full holdings heading into the fourth quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, totaling about $1.4 million in call options.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as HudBay Minerals Inc (NYSE:HBM) but similarly valued. These stocks are Emergent Biosolutions Inc (NYSE:EBS), 8Point3 Energy Partners LP (NASDAQ:CAFD), Terreno Realty Corporation (NYSE:TRNO), and Benefitfocus Inc (NASDAQ:BNFT). This group of stocks’ market values match HBM’s market value.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $88 million in HBM’s case. Emergent Biosolutions Inc (NYSE:EBS) is the most popular stock in this table. On the other hand Terreno Realty Corporation (NYSE:TRNO) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks HudBay Minerals Inc (NYSE:HBM) is even less popular than TRNO. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.