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 Hecla Mining Company (NYSE:HL).
Is HL a good stock to buy now? Hecla Mining Company (NYSE:HL) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. Hecla Mining Company (NYSE:HL) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 19. There were 13 hedge funds in our database with HL holdings at the end of June. Our calculations also showed that HL isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Lee Ainslie of Maverick Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to view the fresh hedge fund action encompassing Hecla Mining Company (NYSE:HL).
Do Hedge Funds Think HL Is A Good Stock To Buy Now?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the second quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in HL a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the biggest position in Hecla Mining Company (NYSE:HL), worth close to $14.6 million, corresponding to less than 0.1%% of its total 13F portfolio. On Renaissance Technologies's heels is Citadel Investment Group, led by Ken Griffin, holding a $7.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Joel Greenblatt's Gotham Asset Management, Greg Eisner's Engineers Gate Manager and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Engineers Gate Manager allocated the biggest weight to Hecla Mining Company (NYSE:HL), around 0.18% of its 13F portfolio. Gotham Asset Management is also relatively very bullish on the stock, earmarking 0.16 percent of its 13F equity portfolio to HL.
As industrywide interest jumped, some big names have jumped into Hecla Mining Company (NYSE:HL) headfirst. GLG Partners, managed by Noam Gottesman, initiated the biggest position in Hecla Mining Company (NYSE:HL). GLG Partners had $1.2 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $0.8 million position during the quarter. The other funds with new positions in the stock are Peter Muller's PDT Partners, Lee Ainslie's Maverick Capital, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Hecla Mining Company (NYSE:HL) but similarly valued. We will take a look at ALLETE Inc (NYSE:ALE), Energizer Holdings, Inc. (NYSE:ENR), Viavi Solutions Inc (NASDAQ:VIAV), LCI Industries (NYSE:LCII), Kornit Digital Ltd. (NASDAQ:KRNT), Intercorp Financial Services Inc. (NYSE:IFS), and Colliers International Group Inc (NASDAQ:CIGI). This group of stocks' market valuations are closest to HL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALE,20,79507,-5 ENR,28,221150,3 VIAV,29,328204,-2 LCII,25,113779,7 KRNT,18,86176,9 IFS,2,24716,0 CIGI,10,594942,-1 Average,18.9,206925,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $43 million in HL's case. Viavi Solutions Inc (NASDAQ:VIAV) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 2 bullish hedge fund positions. Hecla Mining Company (NYSE:HL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HL is 63.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately HL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); HL investors were disappointed as the stock returned -1.2% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.