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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards SSR Mining Inc. (NASDAQ:SSRM) and determine whether hedge funds skillfully traded this stock.
SSR Mining Inc. (NASDAQ:SSRM) has experienced a decrease in hedge fund interest of late. SSR Mining Inc. (NASDAQ:SSRM) was in 18 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. There were 22 hedge funds in our database with SSRM holdings at the end of March. Our calculations also showed that SSRM isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 are checking out this junior gold mining stock and 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 to get excerpts of these letters in your inbox. Now let's view the fresh hedge fund action regarding SSR Mining Inc. (NASDAQ:SSRM).
Hedge fund activity in SSR Mining Inc. (NASDAQ:SSRM)
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the first quarter of 2020. By comparison, 16 hedge funds held shares or bullish call options in SSRM a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of SSR Mining Inc. (NASDAQ:SSRM), with a stake worth $141 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $27.8 million. Sprott Asset Management, Paulson & Co, and Capital Growth Management 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 Capital Growth Management allocated the biggest weight to SSR Mining Inc. (NASDAQ:SSRM), around 2.36% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, designating 1.54 percent of its 13F equity portfolio to SSRM.
Due to the fact that SSR Mining Inc. (NASDAQ:SSRM) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers that slashed their positions entirely last quarter. At the top of the heap, Brian Ashford-Russell and Tim Woolley's Polar Capital sold off the biggest investment of all the hedgies watched by Insider Monkey, worth about $3.8 million in stock, and Michael Hintze's CQS Cayman LP was right behind this move, as the fund dropped about $3.2 million worth. These transactions are interesting, as total hedge fund interest fell by 4 funds last quarter.
Let's go over hedge fund activity in other stocks similar to SSR Mining Inc. (NASDAQ:SSRM). These stocks are Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), SPS Commerce, Inc. (NASDAQ:SPSC), Mimecast Limited (NASDAQ:MIME), Brighthouse Financial, Inc. (NASDAQ:BHF), Diodes Incorporated (NASDAQ:DIOD), Manchester United PLC (NYSE:MANU), and Green Dot Corporation (NYSE:GDOT). This group of stocks' market values are closest to SSRM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBRL,22,192288,-1 SPSC,19,171817,3 MIME,34,256708,-5 BHF,34,332550,9 DIOD,14,78957,1 MANU,11,35251,3 GDOT,23,700625,1 Average,22.4,252599,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $291 million in SSRM's case. Mimecast Limited (NASDAQ:MIME) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 11 bullish hedge fund positions. SSR Mining Inc. (NASDAQ:SSRM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SSRM is 40.8. 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 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately SSRM wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SSRM investors were disappointed as the stock returned -12.5% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.