Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of International Tower Hill Mines Ltd(USA] (NYSE:THM).
Is International Tower Hill Mines Ltd(USA] (NYSE:THM) a buy here? The best stock pickers are becoming less confident. The number of bullish hedge fund positions were trimmed by 1 recently. Our calculations also showed that THM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are dozens of formulas stock market investors can use to assess stocks. A duo of the most innovative formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite investment managers can trounce the market by a very impressive margin (see the details here).
[caption id="attachment_25305" align="alignnone" width="600"] John Paulson of Paulson & Co[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's take a gander at the latest hedge fund action encompassing International Tower Hill Mines Ltd(USA] (NYSE:THM).
How are hedge funds trading International Tower Hill Mines Ltd(USA] (NYSE:THM)?
At Q3's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in THM a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Paulson & Co, managed by John Paulson, holds the number one position in International Tower Hill Mines Ltd(USA] (NYSE:THM). Paulson & Co has a $31 million position in the stock, comprising 0.6% of its 13F portfolio. On Paulson & Co's heels is David Iben of Kopernik Global Investors, with a $4.1 million position; 0.8% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions encompass Renaissance Technologies, Eric Sprott's Sprott Asset Management and . In terms of the portfolio weights assigned to each position Kopernik Global Investors allocated the biggest weight to International Tower Hill Mines Ltd(USA] (NYSE:THM), around 0.77% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, dishing out 0.62 percent of its 13F equity portfolio to THM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified THM as a viable investment and initiated a position in the stock.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as International Tower Hill Mines Ltd(USA] (NYSE:THM) but similarly valued. These stocks are Carolina Trust Bank (NASDAQ:CART), Ur-Energy Inc. (NYSE:URG), China XD Plastics Co Ltd (NASDAQ:CXDC), and Itamar Medical Ltd. (NASDAQ:ITMR). This group of stocks' market valuations are similar to THM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CART,5,6371,4 URG,1,3204,-2 CXDC,1,1227,-1 ITMR,2,4307,0 Average,2.25,3777,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $35 million in THM's case. Carolina Trust Bank (NASDAQ:CART) is the most popular stock in this table. On the other hand Ur-Energy Inc. (NYSE:URG) is the least popular one with only 1 bullish hedge fund positions. International Tower Hill Mines Ltd(USA] (NYSE:THM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately THM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on THM were disappointed as the stock returned 1.9% 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.