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Was The Smart Money Right About AngloGold Ashanti Limited (AU)?

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Last year we predicted the arrival of the first US recession since 2009 and we told in advance 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 AngloGold Ashanti Limited (NYSE:AU).

AngloGold Ashanti Limited (NYSE:AU) was in 12 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 27. AU shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 14 hedge funds in our database with AU positions at the end of the first quarter. Our calculations also showed that AU isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Howard Marks of Oaktree Capital
Howard Marks of Oaktree Capital

Howard Marks of Oaktree Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's go over the new hedge fund action encompassing AngloGold Ashanti Limited (NYSE:AU).

Do Hedge Funds Think AU Is A Good Stock To Buy Now?

At the end of June, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in AU over the last 24 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.

Is AU A Good Stock To Buy?
Is AU A Good Stock To Buy?

More specifically, AQR Capital Management was the largest shareholder of AngloGold Ashanti Limited (NYSE:AU), with a stake worth $135.7 million reported as of the end of June. Trailing AQR Capital Management was Paulson & Co, which amassed a stake valued at $111 million. Oaktree Capital Management, Citadel Investment Group, and D E Shaw 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 Paulson & Co allocated the biggest weight to AngloGold Ashanti Limited (NYSE:AU), around 2.65% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, earmarking 0.9 percent of its 13F equity portfolio to AU.

Due to the fact that AngloGold Ashanti Limited (NYSE:AU) has experienced falling interest from hedge fund managers, it's safe to say that there exists a select few hedgies who sold off their entire stakes last quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management cut the largest position of the "upper crust" of funds monitored by Insider Monkey, worth about $3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also said goodbye to its stock, about $1.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds last quarter.

Let's check out hedge fund activity in other stocks similar to AngloGold Ashanti Limited (NYSE:AU). We will take a look at Reinsurance Group of America Inc (NYSE:RGA), Skechers USA Inc (NYSE:SKX), Tempur Sealy International Inc. (NYSE:TPX), Anaplan, Inc. (NYSE:PLAN), PVH Corp (NYSE:PVH), Lattice Semiconductor Corporation (NASDAQ:LSCC), and LG Display Co Ltd. (NYSE:LPL). This group of stocks' market caps resemble AU's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RGA,28,414971,1 SKX,35,772836,6 TPX,35,1096506,-2 PLAN,52,2141802,-3 PVH,28,1759709,-6 LSCC,24,306527,0 LPL,7,27354,-2 Average,29.9,931386,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $931 million. That figure was $373 million in AU's case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 7 bullish hedge fund positions. AngloGold Ashanti Limited (NYSE:AU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AU is 21.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately AU wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AU investors were disappointed as the stock returned 2% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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