Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before 2018'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 Kinross Gold Corporation (NYSE:KGC) changed recently.
Is Kinross Gold Corporation (NYSE:KGC) the right investment to pursue these days? Money managers are becoming hopeful. The number of long hedge fund positions rose by 8 lately. Our calculations also showed that KGC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). KGC was in 26 hedge funds' portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with KGC holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. Now we're going to check out the key hedge fund action encompassing Kinross Gold Corporation (NYSE:KGC).
How have hedgies been trading Kinross Gold Corporation (NYSE:KGC)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in KGC over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Kinross Gold Corporation (NYSE:KGC), with a stake worth $284.7 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $44 million. Citadel Investment Group, Odey Asset Management Group, and Two Sigma Advisors 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 Sprott Asset Management allocated the biggest weight to Kinross Gold Corporation (NYSE:KGC), around 2.28% of its 13F portfolio. Odey Asset Management Group is also relatively very bullish on the stock, designating 2.25 percent of its 13F equity portfolio to KGC.
With a general bullishness amongst the heavyweights, some big names have jumped into Kinross Gold Corporation (NYSE:KGC) headfirst. GLG Partners, managed by Noam Gottesman, assembled the largest position in Kinross Gold Corporation (NYSE:KGC). GLG Partners had $2.2 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $0.8 million investment in the stock during the quarter. The other funds with brand new KGC positions are Matthew Tewksbury's Stevens Capital Management, Peter Algert and Kevin Coldiron's Algert Coldiron Investors, and Mike Vranos's Ellington.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Kinross Gold Corporation (NYSE:KGC) but similarly valued. We will take a look at Toll Brothers Inc (NYSE:TOL), CACI International Inc (NYSE:CACI), Herbalife Ltd. (NYSE:HLF), and SolarWinds Inc (NYSE:SWI). This group of stocks' market caps match KGC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TOL,22,483101,2 CACI,25,522212,-4 HLF,22,2655964,-5 SWI,13,2504777,-9 Average,20.5,1541514,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $1542 million. That figure was $436 million in KGC's case. CACI International Inc (NYSE:CACI) is the most popular stock in this table. On the other hand SolarWinds Inc (NYSE:SWI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Kinross Gold Corporation (NYSE:KGC) is more popular among hedge funds. 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 10.1 percentage points. Hedge funds were also right about betting on KGC as the stock returned 46.3% in 2019 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.