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In this article we will check out the progression of hedge fund sentiment towards Alamos Gold Inc (NYSE:AGI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is AGI a good stock to buy now? The best stock pickers were in a bearish mood. The number of long hedge fund bets were cut by 1 recently. Alamos Gold Inc (NYSE:AGI) was in 15 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. Our calculations also showed that AGI 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).
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.
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. Now let's review the key hedge fund action encompassing Alamos Gold Inc (NYSE:AGI).
Do Hedge Funds Think AGI Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AGI over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Alamos Gold Inc (NYSE:AGI) was held by Sprott Asset Management, which reported holding $113.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $105.2 million position. Other investors bullish on the company included Arrowstreet Capital, Sun Valley Gold, and Royce & Associates. In terms of the portfolio weights assigned to each position Sun Valley Gold allocated the biggest weight to Alamos Gold Inc (NYSE:AGI), around 19.33% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 4.66 percent of its 13F equity portfolio to AGI.
Because Alamos Gold Inc (NYSE:AGI) has faced bearish sentiment from the smart money, it's easy to see that there was a specific group of funds who were dropping their positions entirely by the end of the third quarter. Interestingly, Ken Heebner's Capital Growth Management cut the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $20.2 million in stock. Louis Bacon's fund, Moore Global Investments, also said goodbye to its stock, about $4.2 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to Alamos Gold Inc (NYSE:AGI). These stocks are Foot Locker, Inc. (NYSE:FL), Sogou Inc. (NYSE:SOGO), LivePerson, Inc. (NASDAQ:LPSN), The Chemours Company (NYSE:CC), Cosan Limited (NYSE:CZZ), Agree Realty Corporation (NYSE:ADC), and Unum Group (NYSE:UNM). All of these stocks' market caps are closest to AGI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FL,26,297082,-3 SOGO,15,139405,10 LPSN,26,201096,3 CC,28,500904,-7 CZZ,14,131081,0 ADC,16,250052,0 UNM,22,202453,0 Average,21,246010,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $404 million in AGI's case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 14 bullish hedge fund positions. Alamos Gold Inc (NYSE:AGI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AGI is 31.3. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately AGI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AGI investors were disappointed as the stock returned 0.1% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.