Is Ur-Energy Inc. (URG) Stock A Buy?
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 Ur-Energy Inc. (NYSE:URG).
Is URG stock a buy? Hedge fund interest in Ur-Energy Inc. (NYSE:URG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that URG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as ObsEva SA (NASDAQ:OBSV), Genprex, Inc. (NASDAQ:GNPX), and Midwest Holding Inc. (NASDAQ:MDWT) to gather more data points.
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 115 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.
Michael Hintze of CQS Cayman LP
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 take a glance at the key hedge fund action encompassing Ur-Energy Inc. (NYSE:URG).
Do Hedge Funds Think URG Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in URG over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Hintze's CQS Cayman LP has the most valuable position in Ur-Energy Inc. (NYSE:URG), worth close to $5.8 million, amounting to 0.4% of its total 13F portfolio. On CQS Cayman LP's heels is ExodusPoint Capital, managed by Michael Gelband, which holds a $0.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Israel Englander's Millennium Management, Ken Griffin's Citadel Investment Group and Eric Sprott's Sprott Asset Management. In terms of the portfolio weights assigned to each position CQS Cayman LP allocated the biggest weight to Ur-Energy Inc. (NYSE:URG), around 0.36% of its 13F portfolio. ExodusPoint Capital is also relatively very bullish on the stock, dishing out 0.002 percent of its 13F equity portfolio to URG.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was ExodusPoint Capital).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Ur-Energy Inc. (NYSE:URG) but similarly valued. We will take a look at ObsEva SA (NASDAQ:OBSV), Genprex, Inc. (NASDAQ:GNPX), Midwest Holding Inc. (NASDAQ:MDWT), MOGU Inc. (NYSE:MOGU), ChoiceOne Financial Services, Inc. (NASDAQ:COFS), AG Mortgage Investment Trust Inc (NYSE:MITT), and Marker Therapeutics, Inc. (NASDAQ:MRKR). This group of stocks' market caps are similar to URG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OBSV,3,1554,-1 GNPX,5,2388,4 MDWT,7,23330,-2 MOGU,3,21358,-3 COFS,1,402,-1 MITT,12,28134,1 MRKR,6,1418,1 Average,5.3,11226,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.3 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $6 million in URG's case. AG Mortgage Investment Trust Inc (NYSE:MITT) is the most popular stock in this table. On the other hand ChoiceOne Financial Services, Inc. (NASDAQ:COFS) is the least popular one with only 1 bullish hedge fund positions. Ur-Energy Inc. (NYSE:URG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for URG is 48.6. 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 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on URG as the stock returned 50.9% since the end of the first quarter (through 6/11) 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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