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Is Golden Star Resources Ltd. (NYSE:GSS) A Good Stock To Buy?

Faizan Farooque

Is Golden Star Resources Ltd. (NYSE:GSS) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profiles failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Golden Star Resources Ltd. (NYSE:GSS) a superb stock to buy now? Money managers are becoming less confident. The number of long hedge fund positions decreased by 3 lately. Our calculations also showed that GSS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GSS was in 3 hedge funds' portfolios at the end of September. There were 6 hedge funds in our database with GSS positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26340" align="alignnone" width="594"] Ken Griffin of Citadel Investment Group[/caption]

CITADEL INVESTMENT GROUP

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. With all of this in mind, we're going to take a gander at the fresh hedge fund action regarding Golden Star Resources Ltd. (NYSE:GSS).

Hedge fund activity in Golden Star Resources Ltd. (NYSE:GSS)

At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in GSS a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is Golden Star Resources Ltd. (NYSE:GSS) A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Golden Star Resources Ltd. (NYSE:GSS), with a stake worth $6.8 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $0.1 million. Millennium Management was 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, Renaissance Technologies allocated the biggest weight to Golden Star Resources Ltd. (NYSE:GSS), around 0.01% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, dishing out 0.0001 percent of its 13F equity portfolio to GSS.

Judging by the fact that Golden Star Resources Ltd. (NYSE:GSS) has witnessed declining sentiment from the aggregate hedge fund industry, it's safe to say that there exist a select few money managers who were dropping their entire stakes last quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace dropped the biggest investment of all the hedgies tracked by Insider Monkey, comprising close to $0.4 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Golden Star Resources Ltd. (NYSE:GSS) but similarly valued. We will take a look at Natural Resource Partners LP (NYSE:NRP), CEL-SCI Corporation (NYSE:CVM), Source Capital, Inc. (NYSE:SOR), and Zynex, Inc. (NASDAQ:ZYXI). This group of stocks' market valuations match GSS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NRP,5,16842,-1 CVM,5,1807,3 SOR,2,8353,0 ZYXI,7,6867,3 Average,4.75,8467,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $7 million in GSS's case. Zynex, Inc. (NASDAQ:ZYXI) is the most popular stock in this table. On the other hand Source Capital, Inc. (NYSE:SOR) is the least popular one with only 2 bullish hedge fund positions. Golden Star Resources Ltd. (NYSE:GSS) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on GSS as the stock returned 15.7% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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