Hedge Funds Are Sort Of Betting On PolyMet Mining Corp. (PLM)
At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards PolyMet Mining Corp. (NYSE:PLM).
PolyMet Mining Corp. (NYSE:PLM) has experienced an increase in activity from the world's largest hedge funds lately. PLM was in 3 hedge funds' portfolios at the end of the first quarter of 2020. There were 2 hedge funds in our database with PLM positions at the end of the previous quarter. Our calculations also showed that PLM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_258236" align="aligncenter" width="400"]
Ken Griffin of Citadel Investment Group[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the latest hedge fund action surrounding PolyMet Mining Corp. (NYSE:PLM).
How are hedge funds trading PolyMet Mining Corp. (NYSE:PLM)?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the fourth quarter of 2019. By comparison, 2 hedge funds held shares or bullish call options in PLM a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in PolyMet Mining Corp. (NYSE:PLM) was held by Elkhorn Partners, which reported holding $0.4 million worth of stock at the end of September. It was followed by Schonfeld Strategic Advisors with a $0 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
As one would reasonably expect, specific money managers were leading the bulls' herd. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), created the largest position in PolyMet Mining Corp. (NYSE:PLM). Schonfeld Strategic Advisors had $0 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $0 million position during the quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PolyMet Mining Corp. (NYSE:PLM) but similarly valued. These stocks are Southern National Banc. of Virginia, Inc (NASDAQ:SONA), PCSB Financial Corporation (NASDAQ:PCSB), Michaels Companies Inc (NASDAQ:MIK), and HEXO Corp. (NYSE:HEXO). This group of stocks' market valuations are similar to PLM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SONA,10,13333,1 PCSB,10,18293,-1 MIK,22,32826,-4 HEXO,7,720,1 Average,12.25,16293,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $0 million in PLM's case. Michaels Companies Inc (NASDAQ:MIK) is the most popular stock in this table. On the other hand HEXO Corp. (NYSE:HEXO) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks PolyMet Mining Corp. (NYSE:PLM) is even less popular than HEXO. Hedge funds dodged a bullet by taking a bearish stance towards PLM. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately PLM wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); PLM investors were disappointed as the stock returned 8.3% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
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