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Hedge Funds Have Never Been This Bullish On Americas Silver Corporation (USAS)

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Americas Silver Corporation (NYSE:USAS).

Americas Silver Corporation (NYSE:USAS) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that USAS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

Michael Hintze CQS Cayman

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to go over the recent hedge fund action encompassing Americas Silver Corporation (NYSE:USAS).

What have hedge funds been doing with Americas Silver Corporation (NYSE:USAS)?

At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards USAS over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is USAS A Good Stock To Buy?

Among these funds, CQS Cayman LP held the most valuable stake in Americas Silver Corporation (NYSE:USAS), which was worth $1.3 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $0.5 million worth of shares. Horizon Asset Management was 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 CQS Cayman LP allocated the biggest weight to Americas Silver Corporation (NYSE:USAS), around 0.06% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, setting aside 0.0038 percent of its 13F equity portfolio to USAS.

As one would reasonably expect, key money managers were leading the bulls' herd. CQS Cayman LP, managed by Michael Hintze, initiated the most valuable position in Americas Silver Corporation (NYSE:USAS). CQS Cayman LP had $1.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.5 million investment in the stock during the quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Americas Silver Corporation (NYSE:USAS) but similarly valued. We will take a look at Galectin Therapeutics Inc. (NASDAQ:GALT), Entegra Financial Corp (NASDAQ:ENFC), Sutro Biopharma, Inc. (NASDAQ:STRO), and Kamada Ltd (NASDAQ:KMDA). All of these stocks' market caps match USAS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GALT,5,332,1 ENFC,6,18780,1 STRO,10,38528,0 KMDA,3,4461,0 Average,6,15525,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $2 million in USAS's case. Sutro Biopharma, Inc. (NASDAQ:STRO) is the most popular stock in this table. On the other hand Kamada Ltd (NASDAQ:KMDA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Americas Silver Corporation (NYSE:USAS) is even less popular than KMDA. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on USAS, though not to the same extent, as the stock returned 7.1% during the fourth quarter (through 11/30) and outperformed the market as well.

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

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