The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Sibanye Gold Limited (NYSE:SBGL), and what that likely means for the prospects of the company and its stock.
Is Sibanye Gold Limited (NYSE:SBGL) the right investment to pursue these days? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets went up by 5 lately. Our calculations also showed that SBGL 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.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the recent hedge fund action regarding Sibanye Gold Limited (NYSE:SBGL).
What does smart money think about Sibanye Gold Limited (NYSE:SBGL)?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 56% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in SBGL a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Sibanye Gold Limited (NYSE:SBGL) was held by Millennium Management, which reported holding $27.4 million worth of stock at the end of September. It was followed by GLG Partners with a $21.3 million position. Other investors bullish on the company included Arrowstreet Capital, Renaissance Technologies, and Slate Path Capital. In terms of the portfolio weights assigned to each position Slate Path Capital allocated the biggest weight to Sibanye Gold Limited (NYSE:SBGL), around 0.89% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.16 percent of its 13F equity portfolio to SBGL.
As industrywide interest jumped, key hedge funds were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, established the largest position in Sibanye Gold Limited (NYSE:SBGL). Point72 Asset Management had $12.8 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $4.6 million investment in the stock during the quarter. The following funds were also among the new SBGL investors: Dmitry Balyasny's Balyasny Asset Management, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and John Zaro's Bourgeon Capital.
Let's now review hedge fund activity in other stocks similar to Sibanye Gold Limited (NYSE:SBGL). These stocks are ANGI Homeservices Inc. (NASDAQ:ANGI), Murphy Oil Corporation (NYSE:MUR), New Relic Inc (NYSE:NEWR), and Two Harbors Investment Corp (NYSE:TWO). This group of stocks' market caps match SBGL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ANGI,21,261024,1 MUR,17,143553,-1 NEWR,35,518778,6 TWO,13,64248,0 Average,21.5,246901,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $135 million in SBGL's case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand Two Harbors Investment Corp (NYSE:TWO) is the least popular one with only 13 bullish hedge fund positions. Sibanye Gold Limited (NYSE:SBGL) is not the least popular stock in this group but hedge fund interest is still below average. 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 SBGL as the stock returned 47.4% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.