U.S. markets open in 3 hours 6 minutes
  • S&P Futures

    4,601.50
    -49.50 (-1.06%)
     
  • Dow Futures

    34,617.00
    -460.00 (-1.31%)
     
  • Nasdaq Futures

    16,303.00
    -87.75 (-0.54%)
     
  • Russell 2000 Futures

    2,199.20
    -41.00 (-1.83%)
     
  • Crude Oil

    68.13
    -1.82 (-2.60%)
     
  • Gold

    1,797.80
    +12.60 (+0.71%)
     
  • Silver

    22.85
    +0.05 (+0.22%)
     
  • EUR/USD

    1.1361
    +0.0068 (+0.60%)
     
  • 10-Yr Bond

    1.5300
    0.0000 (0.00%)
     
  • Vix

    27.16
    -1.46 (-5.10%)
     
  • GBP/USD

    1.3343
    +0.0031 (+0.23%)
     
  • USD/JPY

    112.8350
    -0.7730 (-0.68%)
     
  • BTC-USD

    57,152.28
    -94.21 (-0.16%)
     
  • CMC Crypto 200

    1,447.62
    +18.68 (+1.31%)
     
  • FTSE 100

    7,024.30
    -85.65 (-1.20%)
     
  • Nikkei 225

    27,821.76
    -462.16 (-1.63%)
     

Were Hedge Funds Right About Dumping Royal Gold, Inc (RGLD)?

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·6 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

In this article we will analyze whether Royal Gold, Inc (NASDAQ:RGLD) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Royal Gold, Inc (NASDAQ:RGLD) was in 17 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 30. RGLD investors should pay attention to a decrease in support from the world's most elite money managers in recent months. There were 26 hedge funds in our database with RGLD positions at the end of the fourth quarter. Our calculations also showed that RGLD isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

According to most traders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are greater than 8000 funds in operation today, Our experts hone in on the elite of this club, approximately 850 funds. Most estimates calculate that this group of people command the majority of the smart money's total asset base, and by tailing their highest performing investments, Insider Monkey has discovered many investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Blair Levinsky of Waratah Capital Advisors
Blair Levinsky of Waratah Capital Advisors

Blair Levinsky of Waratah Capital Advisors

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 view the recent hedge fund action surrounding Royal Gold, Inc (NASDAQ:RGLD).

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

At the end of March, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in RGLD a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Royal Gold, Inc (NASDAQ:RGLD), which was worth $73.8 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $30.5 million worth of shares. Kopernik Global Investors, Citadel Investment Group, and Millennium 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 Kopernik Global Investors allocated the biggest weight to Royal Gold, Inc (NASDAQ:RGLD), around 2.77% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, setting aside 0.62 percent of its 13F equity portfolio to RGLD.

Due to the fact that Royal Gold, Inc (NASDAQ:RGLD) has faced declining sentiment from the smart money, logic holds that there lies a certain "tier" of hedge funds who sold off their full holdings heading into Q2. Intriguingly, Dmitry Balyasny's Balyasny Asset Management sold off the largest investment of all the hedgies watched by Insider Monkey, worth close to $5 million in stock. Michael Gelband's fund, ExodusPoint Capital, also sold off its stock, about $2.8 million worth. These moves are interesting, as aggregate hedge fund interest fell by 9 funds heading into Q2.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Royal Gold, Inc (NASDAQ:RGLD) but similarly valued. We will take a look at Sotera Health Company (NASDAQ:SHC), Exelixis, Inc. (NASDAQ:EXEL), United States Steel Corporation (NYSE:X), Vertiv Holdings Co (NYSE:VRT), Columbia Sportswear Company (NASDAQ:COLM), Toll Brothers Inc (NYSE:TOL), and Prosperity Bancshares, Inc. (NYSE:PB). All of these stocks' market caps resemble RGLD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHC,36,609684,9 EXEL,27,992164,3 X,22,635515,-15 VRT,39,997190,-11 COLM,21,185359,7 TOL,30,699227,-4 PB,21,96958,5 Average,28,602300,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $602 million. That figure was $237 million in RGLD's case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand Columbia Sportswear Company (NASDAQ:COLM) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Royal Gold, Inc (NASDAQ:RGLD) is even less popular than COLM. Our overall hedge fund sentiment score for RGLD is 13. 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. Hedge funds dodged a bullet by taking a bearish stance towards RGLD. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market again by 10.1 percentage points. Unfortunately RGLD wasn't nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); RGLD investors were disappointed as the stock returned 8.5% since the end of the first quarter (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 since 2019.

Get real-time email alerts: Follow Royal Gold Inc (NASDAQ:RGLD)

Suggested Articles:

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