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Is Platinum Group Metals Limited (PLG) A Good Stock To Buy?

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·6 min read
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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Platinum Group Metals Limited (NYSE:PLG).

Platinum Group Metals Limited (NYSE:PLG) has seen a decrease in hedge fund sentiment in recent months. Platinum Group Metals Limited (NYSE:PLG) was in 3 hedge funds' portfolios at the end of September. The all time high for this statistics is 4. Our calculations also showed that PLG 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.

At the moment there are a large number of indicators stock traders have at their disposal to analyze publicly traded companies. A duo of the less utilized indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top fund managers can trounce the market by a significant margin (see the details here).

Eric Sprott Sprott Asset Management
Eric Sprott Sprott Asset Management

Eric Sprott of Sprott Asset Management

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 10 most profitable companies in the world 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. With all of this in mind we're going to analyze the recent hedge fund action regarding Platinum Group Metals Limited (NYSE:PLG).

How are hedge funds trading Platinum Group Metals Limited (NYSE:PLG)?

At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PLG over the last 21 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, CQS Cayman LP held the most valuable stake in Platinum Group Metals Limited (NYSE:PLG), which was worth $1.8 million at the end of the third quarter. On the second spot was Sprott Asset Management which amassed $1.2 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 CQS Cayman LP allocated the biggest weight to Platinum Group Metals Limited (NYSE:PLG), around 0.23% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to PLG.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified PLG as a viable investment and initiated a position in the stock.

Let's also examine hedge fund activity in other stocks similar to Platinum Group Metals Limited (NYSE:PLG). These stocks are Codorus Valley Bancorp, Inc. (NASDAQ:CVLY), NACCO Industries, Inc. (NYSE:NC), Evogene Ltd. (NASDAQ:EVGN), Battalion Oil Corporation (NYSE:BATL), Riot Blockchain, Inc (NASDAQ:RIOT), Points International Ltd (NASDAQ:PCOM), and Entravision Communications Corporation (NYSE:EVC). This group of stocks' market caps resemble PLG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVLY,4,14459,0 NC,4,6624,-1 EVGN,2,2543,1 BATL,4,83866,-1 RIOT,4,1053,1 PCOM,7,20124,-2 EVC,9,15700,-1 Average,4.9,20624,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.9 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $3 million in PLG's case. Entravision Communications Corporation (NYSE:EVC) is the most popular stock in this table. On the other hand Evogene Ltd. (NASDAQ:EVGN) is the least popular one with only 2 bullish hedge fund positions. Platinum Group Metals Limited (NYSE:PLG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLG is 33.6. 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. 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 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on PLG as the stock returned 21.5% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.

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

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