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Did Hedge Funds Drop The Ball On Gold Fields Limited (GFI) ?

Abigail Fisher

The market has been volatile in the last 6 months as the Federal Reserve continued its rate hikes and then abruptly reversed its stance and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q4 and the beginning of Q1. In this article, we analyze what the smart money thinks of Gold Fields Limited (NYSE:GFI) and find out how it is affected by hedge funds' moves.

Gold Fields Limited (NYSE:GFI) was in 10 hedge funds' portfolios at the end of the first quarter of 2019. GFI investors should pay attention to an increase in activity from the world's largest hedge funds in recent months. There were 9 hedge funds in our database with GFI positions at the end of the previous quarter. Our calculations also showed that GFI isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

We're going to take a peek at the latest hedge fund action regarding Gold Fields Limited (NYSE:GFI).

What does smart money think about Gold Fields Limited (NYSE:GFI)?

Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2018. By comparison, 14 hedge funds held shares or bullish call options in GFI 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.

GFI_june2019

More specifically, Renaissance Technologies was the largest shareholder of Gold Fields Limited (NYSE:GFI), with a stake worth $75.4 million reported as of the end of March. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $74.8 million. Millennium Management, Arrowstreet Capital, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.

As one would reasonably expect, key hedge funds were breaking ground themselves. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, assembled the most valuable call position in Gold Fields Limited (NYSE:GFI). Springbok Capital had $0.7 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Ken Griffin's Citadel Investment Group.

Let's now take a look at hedge fund activity in other stocks similar to Gold Fields Limited (NYSE:GFI). These stocks are Ardagh Group S.A. (NYSE:ARD), Community Bank System, Inc. (NYSE:CBU), Peabody Energy Corporation (NYSE:BTU), and Banco Macro SA (NYSE:BMA). This group of stocks' market values resemble GFI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ARD,12,53581,2 CBU,8,16915,-3 BTU,27,1577543,-4 BMA,16,178559,-1 Average,15.75,456650,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $457 million. That figure was $209 million in GFI's case. Peabody Energy Corporation (NYSE:BTU) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 8 bullish hedge fund positions. Gold Fields Limited (NYSE:GFI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on GFI as the stock returned 39.1% during the same time frame and outperformed the market by an even larger margin.

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

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