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Were Hedge Funds Right About Hycroft Mining Holding Corporation (HYMC)?

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In this article we are going to use hedge fund sentiment as a tool and determine whether Hycroft Mining Holding Corporation (NASDAQ:HYMC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Hycroft Mining Holding Corporation (NASDAQ:HYMC) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds' portfolios at the end of March. Our calculations also showed that HYMC 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 Wrap Technologies, Inc. (NASDAQ:WRAP), International Tower Hill Mines Ltd (NYSE:THM), and Savara, Inc. (NASDAQ:SVRA) to gather more data points.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Andy Redleaf Andrew Redleaf Whitebox Advisors
Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox 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. Now we're going to take a look at the fresh hedge fund action regarding Hycroft Mining Holding Corporation (NASDAQ:HYMC).

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

At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards HYMC over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is HYMC A Good Stock To Buy?
Is HYMC A Good Stock To Buy?

Among these funds, Mudrick Capital Management held the most valuable stake in Hycroft Mining Holding Corporation (NASDAQ:HYMC), which was worth $87.8 million at the end of the fourth quarter. On the second spot was Whitebox Advisors which amassed $41.8 million worth of shares. Highbridge Capital Management, Aristeia Capital, and Mudrick Capital 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 Mudrick Capital Management allocated the biggest weight to Hycroft Mining Holding Corporation (NASDAQ:HYMC), around 9.96% of its 13F portfolio. Whitebox Advisors is also relatively very bullish on the stock, setting aside 1.37 percent of its 13F equity portfolio to HYMC.

Because Hycroft Mining Holding Corporation (NASDAQ:HYMC) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there were a few hedge funds who were dropping their positions entirely in the first quarter. Interestingly, Charles Lemonides's Valueworks LLC said goodbye to the largest position of the "upper crust" of funds tracked by Insider Monkey, comprising about $3.6 million in stock. Parvinder Thiara's fund, Athanor Capital, also dropped its stock, about $0.8 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to Hycroft Mining Holding Corporation (NASDAQ:HYMC). These stocks are Wrap Technologies, Inc. (NASDAQ:WRAP), International Tower Hill Mines Ltd (NYSE:THM), Savara, Inc. (NASDAQ:SVRA), Equillium, Inc. (NASDAQ:EQ), Identiv, Inc. (NASDAQ:INVE), Silvercrest Asset Management Group Inc (NASDAQ:SAMG), and Medicenna Therapeutics Corp. (NASDAQ:MDNA). All of these stocks' market caps are similar to HYMC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WRAP,4,2809,0 THM,4,108655,-1 SVRA,10,29388,3 EQ,7,17138,2 INVE,7,28771,0 SAMG,4,15171,0 MDNA,5,5019,2 Average,5.9,29564,0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $193 million in HYMC's case. Savara, Inc. (NASDAQ:SVRA) is the most popular stock in this table. On the other hand Wrap Technologies, Inc. (NASDAQ:WRAP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Hycroft Mining Holding Corporation (NASDAQ:HYMC) is more popular among hedge funds. Our overall hedge fund sentiment score for HYMC is 85. 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately HYMC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on HYMC were disappointed as the stock returned -34.9% 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.

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