Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Seabridge Gold, Inc. (NYSE:SA).
Seabridge Gold, Inc. (NYSE:SA) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that SA 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' 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.
[caption id="attachment_25305" align="alignnone" width="600"] John Paulson of Paulson & Co[/caption]
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. Now we're going to take a peek at the fresh hedge fund action encompassing Seabridge Gold, Inc. (NYSE:SA).
What have hedge funds been doing with Seabridge Gold, Inc. (NYSE:SA)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SA over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Weiss Asset Management held the most valuable stake in Seabridge Gold, Inc. (NYSE:SA), which was worth $16.5 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $8.9 million worth of shares. Sprott Asset Management, Millennium Management, and Citadel Investment Group 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 Sprott Asset Management allocated the biggest weight to Seabridge Gold, Inc. (NYSE:SA), around 1.98% of its 13F portfolio. Weiss Asset Management is also relatively very bullish on the stock, designating 1.32 percent of its 13F equity portfolio to SA.
Since Seabridge Gold, Inc. (NYSE:SA) has witnessed bearish sentiment from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of fund managers that slashed their entire stakes heading into Q4. Intriguingly, Ken Griffin's Citadel Investment Group sold off the biggest stake of the "upper crust" of funds watched by Insider Monkey, comprising about $1.3 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also said goodbye to its stock, about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds heading into Q4.
Let's now review hedge fund activity in other stocks similar to Seabridge Gold, Inc. (NYSE:SA). These stocks are GoPro Inc (NASDAQ:GPRO), Oritani Financial Corp. (NASDAQ:ORIT), Homology Medicines, Inc. (NASDAQ:FIXX), and BJ's Restaurants, Inc. (NASDAQ:BJRI). This group of stocks' market valuations are similar to SA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPRO,16,181016,-3 ORIT,8,43932,2 FIXX,12,174472,-6 BJRI,9,82659,-5 Average,11.25,120520,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $39 million in SA's case. GoPro Inc (NASDAQ:GPRO) is the most popular stock in this table. On the other hand Oritani Financial Corp. (NASDAQ:ORIT) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Seabridge Gold, Inc. (NYSE:SA) is even less popular than ORIT. Hedge funds dodged a bullet by taking a bearish stance towards SA. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); SA investors were disappointed as the stock returned 2.5% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.