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Were Hedge Funds Right About B2Gold Corp (BTG)?

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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 B2Gold Corp (NYSE:BTG).

B2Gold Corp (NYSE:BTG) was in 18 hedge funds' portfolios at the end of March. The all time high for this statistic is 22. BTG has experienced a decrease in support from the world's most elite money managers recently. There were 22 hedge funds in our database with BTG positions at the end of the fourth quarter. Our calculations also showed that BTG isn't among the 30 most popular stocks among hedge funds (click for Q1 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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners
Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 recent hedge fund action encompassing B2Gold Corp (NYSE:BTG).

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

At first quarter's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BTG over the last 23 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is BTG A Good Stock To Buy?
Is BTG A Good Stock To Buy?

The largest stake in B2Gold Corp (NYSE:BTG) was held by Renaissance Technologies, which reported holding $182.1 million worth of stock at the end of December. It was followed by GLG Partners with a $50 million position. Other investors bullish on the company included Sprott Asset Management, Two Sigma Advisors, and Sun Valley Gold. In terms of the portfolio weights assigned to each position Sun Valley Gold allocated the biggest weight to B2Gold Corp (NYSE:BTG), around 5.03% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, earmarking 2.24 percent of its 13F equity portfolio to BTG.

Judging by the fact that B2Gold Corp (NYSE:BTG) has experienced falling interest from the smart money, it's easy to see that there is a sect of hedgies who were dropping their full holdings by the end of the first quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the biggest investment of the "upper crust" of funds monitored by Insider Monkey, totaling close to $11.6 million in stock, and Louis Bacon's Moore Global Investments was right behind this move, as the fund said goodbye to about $2.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds by the end of the first quarter.

Let's check out hedge fund activity in other stocks similar to B2Gold Corp (NYSE:BTG). These stocks are Zhihu Inc. (NYSE:ZH), Element Solutions Inc. (NYSE:ESI), DCP Midstream LP (NYSE:DCP), Simpson Manufacturing Co, Inc. (NYSE:SSD), Semtech Corporation (NASDAQ:SMTC), Open Lending Corporation (NASDAQ:LPRO), and Sonos, Inc. (NASDAQ:SONO). All of these stocks' market caps match BTG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZH,23,94311,23 ESI,33,624419,4 DCP,4,20645,1 SSD,25,239346,0 SMTC,21,209600,4 LPRO,33,511506,-1 SONO,46,763124,3 Average,26.4,351850,4.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $313 million in BTG's case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 4 bullish hedge fund positions. B2Gold Corp (NYSE:BTG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BTG is 42.2. 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 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately BTG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BTG investors were disappointed as the stock returned -7.7% since the end of March (through 7/23) 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.