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Hedge Funds Done Buying Pan American Silver Corp. (PAAS)?

Debasis Saha

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 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Pan American Silver Corp. (NASDAQ:PAAS).

Hedge fund interest in Pan American Silver Corp. (NASDAQ:PAAS) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare PAAS to other stocks including American States Water Co (NYSE:AWR), AerCap Holdings N.V. (NYSE:AER), and BOK Financial Corporation (NASDAQ:BOKF) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.

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' 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 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.

[caption id="attachment_258236" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/caption]

Ken Griffin

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now we're going to take a look at the fresh hedge fund action regarding Pan American Silver Corp. (NASDAQ:PAAS).

How are hedge funds trading Pan American Silver Corp. (NASDAQ:PAAS)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in PAAS a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Is PAAS A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Renaissance Technologies, holds the biggest position in Pan American Silver Corp. (NASDAQ:PAAS). Renaissance Technologies has a $108.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Eric Sprott of Sprott Asset Management, with a $85.1 million position; 7.8% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish contain David Greenspan's Slate Path Capital, Ken Griffin's Citadel Investment Group and Vadim Rubinchik's Brightlight Capital. In terms of the portfolio weights assigned to each position Greywolf Capital Management allocated the biggest weight to Pan American Silver Corp. (NASDAQ:PAAS), around 20.97% of its 13F portfolio. Sloane Robinson Investment Management is also relatively very bullish on the stock, earmarking 14 percent of its 13F equity portfolio to PAAS.

Because Pan American Silver Corp. (NASDAQ:PAAS) has faced declining sentiment from hedge fund managers, logic holds that there is a sect of funds that decided to sell off their positions entirely last quarter. At the top of the heap, Mark Broach's Manatuck Hill Partners dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $1.2 million in stock. Minhua Zhang's fund, Weld Capital Management, also dropped its stock, about $0.9 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to Pan American Silver Corp. (NASDAQ:PAAS). We will take a look at American States Water Co (NYSE:AWR), AerCap Holdings N.V. (NYSE:AER), BOK Financial Corporation (NASDAQ:BOKF), and FirstCash, Inc. (NASDAQ:FCFS). This group of stocks' market values are closest to PAAS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AWR,19,50907,-2 AER,32,616402,-4 BOKF,22,145009,7 FCFS,16,107030,0 Average,22.25,229837,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $341 million in PAAS's case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand FirstCash, Inc. (NASDAQ:FCFS) is the least popular one with only 16 bullish hedge fund positions. Pan American Silver Corp. (NASDAQ:PAAS) 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 PAAS as the stock returned 104.9% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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