U.S. Markets closed

Here’s What Hedge Funds Think About Eldorado Gold Corp (EGO)

Nina Todic

Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 12.1% in 2019 (through May 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 18.7% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Eldorado Gold Corp (NYSE:EGO).

Eldorado Gold Corp (NYSE:EGO) has experienced an increase in hedge fund sentiment in recent months. EGO was in 11 hedge funds' portfolios at the end of the first quarter of 2019. There were 8 hedge funds in our database with EGO holdings at the end of the previous quarter. Our calculations also showed that ego isn't among the 30 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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

Let's take a look at the fresh hedge fund action encompassing Eldorado Gold Corp (NYSE:EGO).

What have hedge funds been doing with Eldorado Gold Corp (NYSE:EGO)?

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in EGO a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with EGO Positions

According to Insider Monkey's hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the number one position in Eldorado Gold Corp (NYSE:EGO). Renaissance Technologies has a $9.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is D E Shaw, managed by D. E. Shaw, which holds a $5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Peter Franklin Palmedo's Sun Valley Gold, Paul Marshall and Ian Wace's Marshall Wace LLP and Israel Englander's Millennium Management.

Consequently, specific money managers have jumped into Eldorado Gold Corp (NYSE:EGO) headfirst. Sun Valley Gold, managed by Peter Franklin Palmedo, initiated the biggest position in Eldorado Gold Corp (NYSE:EGO). Sun Valley Gold had $3.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $1.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander's Millennium Management, Peter Muller's PDT Partners, and Cliff Asness's AQR Capital Management.

Let's go over hedge fund activity in other stocks similar to Eldorado Gold Corp (NYSE:EGO). We will take a look at Comstock Resources Inc (NYSE:CRK), German American Bancorp., Inc. (NASDAQ:GABC), M/I Homes Inc (NYSE:MHO), and United Financial Bancorp, Inc. (NASDAQ:UBNK). All of these stocks' market caps are closest to EGO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRK,8,7375,0 GABC,6,14020,2 MHO,15,48134,3 UBNK,8,72006,1 Average,9.25,35384,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $24 million in EGO's case. M/I Homes Inc (NYSE:MHO) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 6 bullish hedge fund positions. Eldorado Gold Corp (NYSE:EGO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately EGO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EGO were disappointed as the stock returned -2.6% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

Related Content