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Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. 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 are going to take a look at the smart money sentiment towards MAG Silver Corporation (NYSE:MAG) over the last 4+ years.
Is MAG Silver Corporation (NYSE:MAG) worth your attention right now? Prominent investors are becoming less confident. The number of bullish hedge fund positions were cut by 2 recently. Our calculations also showed that MAG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most stock holders, hedge funds are perceived as worthless, outdated investment tools of years past. While there are over 8000 funds in operation at the moment, We hone in on the elite of this group, approximately 850 funds. It is estimated that this group of investors administer most of all hedge funds' total capital, and by monitoring their highest performing investments, Insider Monkey has determined numerous investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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Matthew Hulsizer of PEAK6 Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. 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. Keeping this in mind let's go over the fresh hedge fund action regarding MAG Silver Corporation (NYSE:MAG).
What does smart money think about MAG Silver Corporation (NYSE:MAG)?
At Q4's end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MAG over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Sprott Asset Management held the most valuable stake in MAG Silver Corporation (NYSE:MAG), which was worth $18.6 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $10.2 million worth of shares. D E Shaw, Royce & Associates, and Renaissance Technologies 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 MAG Silver Corporation (NYSE:MAG), around 3.85% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, earmarking 1.34 percent of its 13F equity portfolio to MAG.
Since MAG Silver Corporation (NYSE:MAG) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedge funds who were dropping their full holdings heading into Q4. Intriguingly, Bart Baum's Ionic Capital Management said goodbye to the largest stake of the "upper crust" of funds watched by Insider Monkey, comprising about $1.4 million in stock, and George Zweig, Shane Haas and Ravi Chander's Signition LP was right behind this move, as the fund sold off about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks similar to MAG Silver Corporation (NYSE:MAG). We will take a look at Bain Capital Specialty Finance, Inc. (NYSE:BCSF), RadNet Inc. (NASDAQ:RDNT), Ebix Inc (NASDAQ:EBIX), and Cryolife Inc (NYSE:CRY). This group of stocks' market valuations are similar to MAG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BCSF,8,40264,1 RDNT,14,74415,-2 EBIX,19,82096,1 CRY,10,55721,0 Average,12.75,63124,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $45 million in MAG's case. Ebix Inc (NASDAQ:EBIX) is the most popular stock in this table. On the other hand Bain Capital Specialty Finance, Inc. (NYSE:BCSF) is the least popular one with only 8 bullish hedge fund positions. MAG Silver Corporation (NYSE:MAG) 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on MAG, though not to the same extent, as the stock returned -3% during the same time period and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.