Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards International Tower Hill Mines Ltd (NYSE:THM).
Is International Tower Hill Mines (THM) a good stock to buy now? THM was in 5 hedge funds' portfolios at the end of September. The all time high for this statistics is 5. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. THM investors should pay attention to an increase in support from the world's most elite money managers of late. There were 4 hedge funds in our database with THM holdings at the end of June. Our calculations also showed that THM 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Paulson of Paulson & Co
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 go over the fresh hedge fund action encompassing International Tower Hill Mines Ltd (NYSE:THM).
What have hedge funds been doing with International Tower Hill Mines Ltd (NYSE:THM)?
At third quarter's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards THM over the last 21 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Paulson & Co held the most valuable stake in International Tower Hill Mines Ltd (NYSE:THM), which was worth $82.4 million at the end of the third quarter. On the second spot was Sprott Asset Management which amassed $79.8 million worth of shares. Kopernik Global Investors, Renaissance Technologies, and Citadel Investment Group were 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 Sprott Asset Management allocated the biggest weight to International Tower Hill Mines Ltd (NYSE:THM), around 3.27% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, earmarking 2.57 percent of its 13F equity portfolio to THM.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Renaissance Technologies, founded by Jim Simons, created the largest position in International Tower Hill Mines Ltd (NYSE:THM). Renaissance Technologies had $0.2 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks similar to International Tower Hill Mines Ltd (NYSE:THM). We will take a look at Applied Optoelectronics Inc (NASDAQ:AAOI), Graybug Vision, Inc. (NASDAQ:GRAY), Sierra Bancorp (NASDAQ:BSRR), W&T Offshore, Inc. (NYSE:WTI), MOGU Inc. (NYSE:MOGU), Limoneira Company (NASDAQ:LMNR), and Denison Mines Corp (NYSE:DNN). This group of stocks' market valuations match THM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAOI,9,12567,-3 GRAY,10,136937,10 BSRR,9,9163,0 WTI,8,12428,-7 MOGU,6,29948,4 LMNR,2,679,-3 DNN,6,4815,2 Average,7.1,29505,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.1 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $172 million in THM's case. Graybug Vision, Inc. (NASDAQ:GRAY) is the most popular stock in this table. On the other hand Limoneira Company (NASDAQ:LMNR) is the least popular one with only 2 bullish hedge fund positions. International Tower Hill Mines Ltd (NYSE:THM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for THM is 54.8. 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 November 27th and surpassed the market again by 16.1 percentage points. Unfortunately THM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); THM investors were disappointed as the stock returned 2.3% since the end of September (through 11/27) 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.
Get real-time email alerts: Follow International Tower Hill Mines Ltd (NYSEMKT:THM)
Disclosure: None. This article was originally published at Insider Monkey.