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Should I Buy Yamana Gold Inc. (AUY)?

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·6 min read
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In this article we are going to use hedge fund sentiment as a tool and determine whether Yamana Gold Inc. (NYSE:AUY) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Yamana Gold Inc. (NYSE:AUY) has experienced an increase in enthusiasm from smart money lately. Yamana Gold Inc. (NYSE:AUY) was in 21 hedge funds' portfolios at the end of March. The all time high for this statistic is 24. There were 20 hedge funds in our database with AUY positions at the end of the fourth quarter. Our calculations also showed that AUY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

At the moment there are many metrics shareholders use to analyze stocks. A duo of the less utilized metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can trounce the broader indices by a superb amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a peek at the recent hedge fund action encompassing Yamana Gold Inc. (NYSE:AUY).

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

At first quarter's end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the fourth quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in AUY a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is AUY A Good Stock To Buy?
Is AUY A Good Stock To Buy?

Among these funds, Renaissance Technologies held the most valuable stake in Yamana Gold Inc. (NYSE:AUY), which was worth $72 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $39.3 million worth of shares. Citadel Investment Group, Quaker Capital Investments, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quaker Capital Investments allocated the biggest weight to Yamana Gold Inc. (NYSE:AUY), around 3.61% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 0.21 percent of its 13F equity portfolio to AUY.

Consequently, key money managers have been driving this bullishness. Quaker Capital Investments, managed by Mark G. Schoeppner, established the most valuable position in Yamana Gold Inc. (NYSE:AUY). Quaker Capital Investments had $8.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $3.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman's Paloma Partners, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Paul Tudor Jones's Tudor Investment Corp.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Yamana Gold Inc. (NYSE:AUY) but similarly valued. We will take a look at Advanced Energy Industries, Inc. (NASDAQ:AEIS), JBG SMITH Properties (NYSE:JBGS), Certara, Inc. (NASDAQ:CERT), Endava plc (NYSE:DAVA), Ultrapar Participacoes SA (NYSE:UGP), Adient plc (NYSE:ADNT), and M.D.C. Holdings, Inc. (NYSE:MDC). This group of stocks' market valuations resemble AUY's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AEIS,23,107038,1 JBGS,11,207465,-5 CERT,12,149884,-7 DAVA,9,80407,-1 UGP,7,25601,-1 ADNT,39,754020,2 MDC,13,36787,-6 Average,16.3,194457,-2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $158 million in AUY's case. Adient plc (NYSE:ADNT) is the most popular stock in this table. On the other hand Ultrapar Participacoes SA (NYSE:UGP) is the least popular one with only 7 bullish hedge fund positions. Yamana Gold Inc. (NYSE:AUY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AUY is 54.1. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately AUY wasn't nearly as popular as these 5 stocks and hedge funds that were betting on AUY were disappointed as the stock returned -2.2% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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