At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Hecla Mining Company (NYSE:HL).
Hecla Mining Company (NYSE:HL) shareholders have witnessed an increase in activity from the world's largest hedge funds lately. Our calculations also showed that HL 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 58 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_844243" align="aligncenter" width="400"] Donald Sussman of Paloma Partners[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February 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 Hecla Mining Company (NYSE:HL).
Hedge fund activity in Hecla Mining Company (NYSE:HL)
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in HL 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.
More specifically, Renaissance Technologies was the largest shareholder of Hecla Mining Company (NYSE:HL), with a stake worth $28 million reported as of the end of September. Trailing Renaissance Technologies was Polar Capital, which amassed a stake valued at $5.5 million. Citadel Investment Group, Millennium Management, and D E Shaw 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 Hecla Mining Company (NYSE:HL), around 0.16% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to HL.
As one would reasonably expect, some big names were leading the bulls' herd. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, assembled the most valuable position in Hecla Mining Company (NYSE:HL). Polar Capital had $5.5 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also initiated a $1.1 million position during the quarter. The following funds were also among the new HL investors: Greg Eisner's Engineers Gate Manager, John Overdeck and David Siegel's Two Sigma Advisors, and Paul Tudor Jones's Tudor Investment Corp.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Hecla Mining Company (NYSE:HL) but similarly valued. We will take a look at Sirius International Insurance Group, Ltd. (NASDAQ:SG), La-Z-Boy Incorporated (NYSE:LZB), Lakeland Financial Corporation (NASDAQ:LKFN), and Sally Beauty Holdings, Inc. (NYSE:SBH). All of these stocks' market caps are similar to HL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SG,2,1669,-2 LZB,21,40118,0 LKFN,9,16390,1 SBH,19,73261,-8 Average,12.75,32860,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $55 million in HL's case. La-Z-Boy Incorporated (NYSE:LZB) is the most popular stock in this table. On the other hand Sirius International Insurance Group, Ltd. (NASDAQ:SG) is the least popular one with only 2 bullish hedge fund positions. Hecla Mining Company (NYSE:HL) 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on HL as the stock returned 63.9% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.