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Hedge Funds Are Betting On Newmont Corporation (NEM)

Abigail Fisher

In this article we will take a look at whether hedge funds think Newmont Corporation (NYSE:NEM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Newmont Corporation (NYSE:NEM) the right pick for your portfolio? Hedge funds are getting more optimistic. The number of bullish hedge fund positions inched up by 9 in recent months. Our calculations also showed that NEM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

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 S&P 500 ETFs by more than 44 percentage points since March 2017 (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_675410" align="aligncenter" width="399"] Zilvinas Mecelis of Covalis Capital[/caption]

Zilvinas Zach Mecelis Covalis Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a peek at the latest hedge fund action encompassing Newmont Corporation (NYSE:NEM).

What does smart money think about Newmont Corporation (NYSE:NEM)?

At Q1's end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NEM over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the most valuable position in Newmont Corporation (NYSE:NEM). Renaissance Technologies has a $541.2 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is International Value Advisers, led by Charles de Vaulx, holding a $86.2 million position; 5.4% of its 13F portfolio is allocated to the company. Some other members of the smart money with similar optimism encompass Cliff Asness's AQR Capital Management, D. E. Shaw's D E Shaw and Eric Sprott's Sprott Asset Management. In terms of the portfolio weights assigned to each position Heathbridge Capital Management allocated the biggest weight to Newmont Corporation (NYSE:NEM), around 6.63% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, dishing out 5.45 percent of its 13F equity portfolio to NEM.

As industrywide interest jumped, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Newmont Corporation (NYSE:NEM). Arrowstreet Capital had $17 million invested in the company at the end of the quarter. John Hempton's Bronte Capital also initiated a $11.8 million position during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, Zilvinas Mecelis's Covalis Capital, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Newmont Corporation (NYSE:NEM) but similarly valued. These stocks are Raytheon Company (NYSE:RTN), Ambev SA (NYSE:ABEV), Digital Realty Trust, Inc. (NYSE:DLR), and Eni SpA (NYSE:E). This group of stocks' market valuations are similar to NEM's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RTN,51,1829093,-2 ABEV,9,254473,-5 DLR,29,302894,3 E,5,35398,-1 Average,23.5,605465,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $605 million. That figure was $1024 million in NEM's case. Raytheon Company (NYSE:RTN) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 5 bullish hedge fund positions. Newmont Corporation (NYSE:NEM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on NEM as the stock returned 29.1% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

[company-follow-email id=1164727][/company-follow-email]

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

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