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Is Endeavour Silver Corp. (EXK) Going to Burn These Hedge Funds?

Reymerlyn Martin

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider Endeavour Silver Corp. (NYSE:EXK) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Endeavour Silver Corp. (NYSE:EXK) was in 6 hedge funds' portfolios at the end of June. EXK shareholders have witnessed a decrease in hedge fund sentiment lately. There were 7 hedge funds in our database with EXK holdings at the end of the previous quarter. Our calculations also showed that EXK isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

MILLENNIUM MANAGEMENT

In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Now we're going to view the new hedge fund action regarding Endeavour Silver Corp. (NYSE:EXK).

What have hedge funds been doing with Endeavour Silver Corp. (NYSE:EXK)?

At the end of the second quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in EXK 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.

EXK_nov2019

More specifically, Renaissance Technologies was the largest shareholder of Endeavour Silver Corp. (NYSE:EXK), with a stake worth $13.7 million reported as of the end of March. Trailing Renaissance Technologies was Sprott Asset Management, which amassed a stake valued at $2 million. Millennium Management, Ancora Advisors, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Since Endeavour Silver Corp. (NYSE:EXK) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there was a specific group of funds that elected to cut their full holdings heading into Q3. At the top of the heap, Brad Dunkley and Blair Levinsky's Waratah Capital Advisors cut the biggest investment of all the hedgies monitored by Insider Monkey, totaling close to $0.4 million in call options, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund dropped about $0.3 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds heading into Q3.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Endeavour Silver Corp. (NYSE:EXK) but similarly valued. We will take a look at Martin Midstream Partners L.P. (NASDAQ:MMLP), Civeo Corporation (NYSE:CVEO), BayCom Corp (NASDAQ:BCML), and Tailored Brands, Inc. (NYSE:TLRD). This group of stocks' market caps are similar to EXK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MMLP,2,1925,1 CVEO,13,117309,-1 BCML,4,22239,0 TLRD,18,42294,0 Average,9.25,45942,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $18 million in EXK's case. Tailored Brands, Inc. (NYSE:TLRD) is the most popular stock in this table. On the other hand Martin Midstream Partners L.P. (NASDAQ:MMLP) is the least popular one with only 2 bullish hedge fund positions. Endeavour Silver Corp. (NYSE:EXK) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on EXK as the stock returned 8.3% 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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