We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Gold Fields Limited (NYSE:GFI).
Gold Fields Limited (NYSE:GFI) investors should be aware of an increase in support from the world's most elite money managers lately. GFI was in 18 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 17 hedge funds in our database with GFI positions at the end of the previous quarter. Our calculations also showed that GFI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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_26575" align="aligncenter" width="397"] Louis Bacon Moore of Moore Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to review the new hedge fund action encompassing Gold Fields Limited (NYSE:GFI).
Hedge fund activity in Gold Fields Limited (NYSE:GFI)
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GFI over the last 18 quarters. So, let's see 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 Gold Fields Limited (NYSE:GFI), with a stake worth $155.1 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $85.5 million. Arrowstreet Capital, Anchor Bolt Capital, and Sun Valley Gold 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 Anchor Bolt Capital allocated the biggest weight to Gold Fields Limited (NYSE:GFI), around 6.28% of its 13F portfolio. Sun Valley Gold is also relatively very bullish on the stock, dishing out 1.5 percent of its 13F equity portfolio to GFI.
Consequently, key money managers have been driving this bullishness. Moore Global Investments, managed by Louis Bacon, initiated the most valuable position in Gold Fields Limited (NYSE:GFI). Moore Global Investments had $6.6 million invested in the company at the end of the quarter. Mark Hart III's Corriente Advisors also made a $1.7 million investment in the stock during the quarter. The other funds with brand new GFI positions are Donald Sussman's Paloma Partners and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's go over hedge fund activity in other stocks similar to Gold Fields Limited (NYSE:GFI). We will take a look at Acuity Brands, Inc. (NYSE:AYI), Churchill Downs Incorporated (NASDAQ:CHDN), Huntsman Corporation (NYSE:HUN), and NewMarket Corporation (NYSE:NEU). This group of stocks' market caps are closest to GFI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AYI,29,822404,1 CHDN,32,599421,6 HUN,39,401253,8 NEU,22,195365,-7 Average,30.5,504611,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $505 million. That figure was $375 million in GFI's case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand NewMarket Corporation (NYSE:NEU) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Gold Fields Limited (NYSE:GFI) is even less popular than NEU. Hedge funds clearly dropped the ball on GFI as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on GFI as the stock returned -3.9% during the same time period and outperformed the market by an even larger margin. 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.