U.S. Markets closed

Here’s What Hedge Funds Think About Sandstorm Gold Ltd. (SAND)

Nina Todic

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of December. At Insider Monkey, we follow nearly 750 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Sandstorm Gold Ltd. (NYSE:SAND), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Sandstorm Gold Ltd. (NYSE:SAND) a buy here? The best stock pickers are in a bearish mood. The number of long hedge fund bets shrunk by 1 lately. Our calculations also showed that sand isn't among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Chuck Royce

We're going to view the recent hedge fund action encompassing Sandstorm Gold Ltd. (NYSE:SAND).

What have hedge funds been doing with Sandstorm Gold Ltd. (NYSE:SAND)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in SAND over the last 14 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SAND Positions

More specifically, Sprott Asset Management was the largest shareholder of Sandstorm Gold Ltd. (NYSE:SAND), with a stake worth $13.9 million reported as of the end of December. Trailing Sprott Asset Management was Marshall Wace LLP, which amassed a stake valued at $10.7 million. Horizon Asset Management, Roumell Asset Management, and Royce & Associates were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Sandstorm Gold Ltd. (NYSE:SAND) has experienced bearish sentiment from hedge fund managers, it's easy to see that there exists a select few money managers that decided to sell off their entire stakes heading into Q3. Interestingly, Jim Simons's Renaissance Technologies dropped the biggest investment of the "upper crust" of funds monitored by Insider Monkey, comprising about $1.6 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund dropped about $1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.

Let's also examine hedge fund activity in other stocks similar to Sandstorm Gold Ltd. (NYSE:SAND). These stocks are Milacron Holdings Corp (NYSE:MCRN), Apogee Enterprises, Inc. (NASDAQ:APOG), Tactile Systems Technology, Inc. (NASDAQ:TCMD), and Canadian Solar Inc. (NASDAQ:CSIQ). This group of stocks' market caps are closest to SAND's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCRN,22,56001,5 APOG,16,115597,-1 TCMD,14,39982,4 CSIQ,11,96306,-4 Average,15.75,76972,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $43 million in SAND's case. Milacron Holdings Corp (NYSE:MCRN) is the most popular stock in this table. On the other hand Canadian Solar Inc. (NASDAQ:CSIQ) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Sandstorm Gold Ltd. (NYSE:SAND) is even less popular than CSIQ. Hedge funds dodged a bullet by taking a bearish stance towards SAND. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SAND wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); SAND investors were disappointed as the stock returned 15.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

Related Content