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Is AG A Good Stock To Buy Now?

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Asma UL Husna
·6 min read
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In this article you are going to find out whether hedge funds think First Majestic Silver Corp (NYSE:AG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is AG a good stock to buy now? First Majestic Silver Corp (NYSE:AG) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds' portfolios at the end of September. Our calculations also showed that AG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 Kennedy-Wilson Holdings Inc (NYSE:KW), Brady Corp (NYSE:BRC), and Moog Inc (NYSE:MOG) to gather more data points.

Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Eric Sprott Sprott Asset Management
Eric Sprott Sprott Asset Management

Eric Sprott of Sprott Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to check out the key hedge fund action encompassing First Majestic Silver Corp (NYSE:AG).

Do Hedge Funds Think AG Is A Good Stock To Buy Now?

At third quarter's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AG over the last 21 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Eric Sprott's Sprott Asset Management has the biggest position in First Majestic Silver Corp (NYSE:AG), worth close to $19.2 million, comprising 0.8% of its total 13F portfolio. The second largest stake is held by Alex Snow of Lansdowne Partners, with a $10.3 million position; 0.4% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism comprise Israel Englander's Millennium Management, and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Sprott Asset Management allocated the biggest weight to First Majestic Silver Corp (NYSE:AG), around 0.79% of its 13F portfolio. Lansdowne Partners is also relatively very bullish on the stock, dishing out 0.41 percent of its 13F equity portfolio to AG.

Since First Majestic Silver Corp (NYSE:AG) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of money managers that slashed their entire stakes by the end of the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dropped the biggest investment of all the hedgies monitored by Insider Monkey, valued at close to $41.5 million in stock, and Renaissance Technologies was right behind this move, as the fund dumped about $30.8 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as First Majestic Silver Corp (NYSE:AG) but similarly valued. We will take a look at Kennedy-Wilson Holdings Inc (NYSE:KW), Brady Corp (NYSE:BRC), Moog Inc (NYSE:MOG), Arconic Corporation (NYSE:ARNC), The Brink's Company (NYSE:BCO), Old National Bancorp (NASDAQ:ONB), and SPX Corporation (NYSE:SPXC). This group of stocks' market values match AG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KW,18,346851,4 BRC,19,139850,2 MOG,19,111492,-4 ARNC,21,633163,5 BCO,28,301172,3 ONB,14,20773,-3 SPXC,13,45983,-5 Average,18.9,228469,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $53 million in AG's case. The Brink's Company (NYSE:BCO) is the most popular stock in this table. On the other hand SPX Corporation (NYSE:SPXC) is the least popular one with only 13 bullish hedge fund positions. First Majestic Silver Corp (NYSE:AG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AG is 30.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on AG as the stock returned 19.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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