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Was The Smart Money Right About Newmont Corporation (NEM)?

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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Newmont Corporation (NYSE:NEM).

Is Newmont Corporation (NYSE:NEM) a buy here? Money managers were betting on the stock. The number of bullish hedge fund positions increased by 12 recently. Newmont Corporation (NYSE:NEM) was in 55 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NEM isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 43 hedge funds in our database with NEM holdings at the end of March.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Phill Gross Adage Capital Phillip Gross
Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We check out articles like Warren Buffett's 3 money saving tips that provide inflation and volatility hedges. 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 we're going to take a glance at the fresh hedge fund action regarding Newmont Corporation (NYSE:NEM).

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

At second quarter's end, a total of 55 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the previous quarter. On the other hand, there were a total of 55 hedge funds with a bullish position in NEM a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Newmont Corporation (NYSE:NEM) was held by GQG Partners, which reported holding $255.1 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $248.5 million position. Other investors bullish on the company included AQR Capital Management, PEAK6 Capital Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Ariose Capital allocated the biggest weight to Newmont Corporation (NYSE:NEM), around 17.96% of its 13F portfolio. Heathbridge Capital Management is also relatively very bullish on the stock, dishing out 8.73 percent of its 13F equity portfolio to NEM.

Consequently, key money managers have jumped into Newmont Corporation (NYSE:NEM) headfirst. GQG Partners, managed by Rajiv Jain, created the most valuable position in Newmont Corporation (NYSE:NEM). GQG Partners had $255.1 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $35.6 million position during the quarter. The following funds were also among the new NEM investors: Ryan Caldwell's Chiron Investment Management, MacKenzie B. Davis and Kenneth L. Settles Jr's SailingStone Capital Partners, and Sander Gerber's Hudson Bay Capital Management.

Let's now take a look at hedge fund activity in other stocks similar to Newmont Corporation (NYSE:NEM). We will take a look at Pinterest, Inc. (NYSE:PINS), Keurig Dr Pepper Inc. (NASDAQ:KDP), The Kraft Heinz Company (NASDAQ:KHC), Prudential Public Limited Company (NYSE:PUK), Southern Copper Corporation (NYSE:SCCO), KLA Corporation (NASDAQ:KLAC), and America Movil SAB de CV (NYSE:AMX). This group of stocks' market caps resemble NEM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PINS,63,2915471,-20 KDP,28,1197414,-2 KHC,33,13577456,0 PUK,4,9037,2 SCCO,23,552258,-4 KLAC,45,1374639,5 AMX,13,114474,-2 Average,29.9,2820107,-3 [/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 $2820 million. That figure was $1256 million in NEM's case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 4 bullish hedge fund positions. Newmont Corporation (NYSE:NEM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEM is 83.2. 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 positive signal but 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 26.3% in 2021 through October 29th and beat the market again by 2.3 percentage points. Unfortunately NEM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NEM were disappointed as the stock returned -14% since the end of June (through 10/29) 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 many of these stocks already outperformed the market since 2019.

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