Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to AngloGold Ashanti Limited (NYSE:AU) changed recently.
Is AngloGold Ashanti Limited (NYSE:AU) an attractive investment right now? Investors who are in the know are buying. The number of long hedge fund bets moved up by 3 in recent months. Our calculations also showed that AU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AU was in 19 hedge funds' portfolios at the end of the third quarter of 2019. There were 16 hedge funds in our database with AU positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous methods shareholders can use to value stocks. A pair of the most innovative methods are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the best fund managers can outclass the S&P 500 by a significant amount (see the details here).
[caption id="attachment_25358" align="aligncenter" width="327"] John Paulson of Paulson & Co[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the key hedge fund action encompassing AngloGold Ashanti Limited (NYSE:AU).
Hedge fund activity in AngloGold Ashanti Limited (NYSE:AU)
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in AU a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, John Paulson's Paulson & Co has the number one position in AngloGold Ashanti Limited (NYSE:AU), worth close to $233.5 million, corresponding to 4.7% of its total 13F portfolio. The second largest stake is held by Oaktree Capital Management, led by Howard Marks, holding a $43.9 million position; 0.9% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Renaissance Technologies and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Paulson & Co allocated the biggest weight to AngloGold Ashanti Limited (NYSE:AU), around 4.68% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, setting aside 1.53 percent of its 13F equity portfolio to AU.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most valuable call position in AngloGold Ashanti Limited (NYSE:AU). Laurion Capital Management had $3.7 million invested in the company at the end of the quarter. Eric Sprott's Sprott Asset Management also initiated a $1.7 million position during the quarter. The following funds were also among the new AU investors: David E. Shaw's D E Shaw, Mike Vranos's Ellington, and Minhua Zhang's Weld Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as AngloGold Ashanti Limited (NYSE:AU) but similarly valued. We will take a look at BorgWarner Inc. (NYSE:BWA), Nielsen Holdings plc (NYSE:NLSN), Douglas Emmett, Inc. (NYSE:DEI), and Teva Pharmaceutical Industries Limited (NYSE:TEVA). This group of stocks' market valuations are closest to AU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BWA,22,718476,1 NLSN,30,1129196,-5 DEI,20,570666,1 TEVA,23,660560,-2 Average,23.75,769725,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $770 million. That figure was $454 million in AU's case. Nielsen Holdings plc (NYSE:NLSN) is the most popular stock in this table. On the other hand Douglas Emmett, Inc. (NYSE:DEI) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks AngloGold Ashanti Limited (NYSE:AU) is even less popular than DEI. Hedge funds dodged a bullet by taking a bearish stance towards AU. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); AU investors were disappointed as the stock returned 4.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.