How do we determine whether AngloGold Ashanti Limited (NYSE:AU) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is AngloGold Ashanti Limited (NYSE:AU) a superb investment today? Money managers are taking a bearish view. The number of bullish hedge fund bets dropped by 7 lately. Our calculations also showed that AU isn't among the 30 most popular stocks among hedge funds (see the video below). AU was in 16 hedge funds' portfolios at the end of the second quarter of 2019. There were 23 hedge funds in our database with AU holdings at the end of the previous quarter. Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a glance at the key hedge fund action encompassing AngloGold Ashanti Limited (NYSE:AU).
What does smart money think about AngloGold Ashanti Limited (NYSE:AU)?
Heading into the third quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AU over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in AngloGold Ashanti Limited (NYSE:AU) was held by Paulson & Co, which reported holding $227.7 million worth of stock at the end of March. It was followed by AQR Capital Management with a $73 million position. Other investors bullish on the company included Oaktree Capital Management, Arrowstreet Capital, and Renaissance Technologies.
Since AngloGold Ashanti Limited (NYSE:AU) has faced declining sentiment from hedge fund managers, logic holds that there exists a select few fund managers who sold off their full holdings heading into Q3. Intriguingly, Michael Platt and William Reeves's BlueCrest Capital Mgmt. said goodbye to the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising about $7 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also dumped its stock, about $3.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 7 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to AngloGold Ashanti Limited (NYSE:AU). These stocks are Genpact Limited (NYSE:G), L Brands Inc (NYSE:LB), Ceridian HCM Holding Inc. (NYSE:CDAY), and Wix.Com Ltd (NASDAQ:WIX). All of these stocks' market caps resemble AU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position G,26,744096,-3 LB,30,644900,-2 CDAY,22,845775,-8 WIX,26,1073011,-1 Average,26,826946,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $827 million. That figure was $480 million in AU's case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Ceridian HCM Holding Inc. (NYSE:CDAY) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks AngloGold Ashanti Limited (NYSE:AU) is even less popular than CDAY. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on AU, though not to the same extent, as the stock returned 2.6% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.