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Hedge Funds Warming Up To Caledonia Mining Corporation Plc (CMCL)

Reymerlyn Martin

In this article we will check out the progression of hedge fund sentiment towards Caledonia Mining Corporation Plc (NYSE:CMCL) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Caledonia Mining Corporation Plc (NYSE:CMCL) has experienced an increase in activity from the world's largest hedge funds lately. CMCL was in 3 hedge funds' portfolios at the end of March. There were 1 hedge funds in our database with CMCL positions at the end of the previous quarter. Our calculations also showed that CMCL 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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_27676" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]

MILLENNIUM MANAGEMENT

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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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. With all of this in mind we're going to take a look at the key hedge fund action regarding Caledonia Mining Corporation Plc (NYSE:CMCL).

What does smart money think about Caledonia Mining Corporation Plc (NYSE:CMCL)?

At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CMCL over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Sloane Robinson Investment Management held the most valuable stake in Caledonia Mining Corporation Plc (NYSE:CMCL), which was worth $1.8 million at the end of the third quarter. On the second spot was Millennium Management which amassed $0.3 million worth of shares. Renaissance Technologies was 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 Sloane Robinson Investment Management allocated the biggest weight to Caledonia Mining Corporation Plc (NYSE:CMCL), around 2.33% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, designating 0.0007 percent of its 13F equity portfolio to CMCL.

Consequently, specific money managers have been driving this bullishness. Sloane Robinson Investment Management, managed by Hugh Sloane, established the most valuable position in Caledonia Mining Corporation Plc (NYSE:CMCL). Sloane Robinson Investment Management had $1.8 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $0.3 million investment in the stock during the quarter.

Let's now review hedge fund activity in other stocks similar to Caledonia Mining Corporation Plc (NYSE:CMCL). These stocks are Northeast Bancorp (NASDAQ:NBN), Soleno Therapeutics, Inc. (NASDAQ:SLNO), B Communications Ltd (NASDAQ:BCOM), and Venus Concept Inc. (NASDAQ:VERO). This group of stocks' market caps resemble CMCL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NBN,6,18679,1 SLNO,9,19054,4 BCOM,1,62,0 VERO,2,854,-1 Average,4.5,9662,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $2 million in CMCL's case. Soleno Therapeutics, Inc. (NASDAQ:SLNO) is the most popular stock in this table. On the other hand B Communications Ltd (NASDAQ:BCOM) is the least popular one with only 1 bullish hedge fund positions. Caledonia Mining Corporation Plc (NYSE:CMCL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds 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 and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on CMCL as the stock returned 69.4% during the second quarter and outperformed the market by an even larger margin.

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

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