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Were Hedge Funds Right About Piling Into Newmont Corporation (NEM)?

Abigail Fisher
·6 min read

In this article we will take a look at whether hedge funds think Newmont Corporation (NYSE:NEM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Newmont Corporation (NYSE:NEM) has experienced an increase in enthusiasm from smart money lately. Newmont Corporation (NYSE:NEM) was in 55 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 43 hedge funds in our database with NEM positions at the end of the first quarter. Our calculations also showed that NEM 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

YORK CAPITAL MANAGEMENT
YORK CAPITAL MANAGEMENT

James Dinan of York Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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 we're going to take a look at the fresh hedge fund action encompassing Newmont Corporation (NYSE:NEM).

What does smart money think about Newmont Corporation (NYSE:NEM)?

At Q2's end, a total of 55 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from the previous quarter. By comparison, 41 hedge funds held shares or bullish call options in NEM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Newmont Corporation (NYSE:NEM), which was worth $793.8 million at the end of the third quarter. On the second spot was GQG Partners which amassed $262 million worth of shares. Citadel Investment Group, AQR Capital Management, 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 Heathbridge Capital Management allocated the biggest weight to Newmont Corporation (NYSE:NEM), around 9.47% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, dishing out 8.72 percent of its 13F equity portfolio to NEM.

As one would reasonably expect, key money managers have jumped into Newmont Corporation (NYSE:NEM) headfirst. GQG Partners, managed by Rajiv Jain, established the most valuable position in Newmont Corporation (NYSE:NEM). GQG Partners had $262 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $171 million position during the quarter. The other funds with new positions in the stock are Ryan Caldwell's Chiron Investment Management, James Dinan's York Capital Management, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Newmont Corporation (NYSE:NEM) but similarly valued. These stocks are Deere & Company (NYSE:DE), Mercadolibre Inc (NASDAQ:MELI), Kimberly Clark Corporation (NYSE:KMB), ABB Ltd (NYSE:ABB), Spotify Technology S.A. (NYSE:SPOT), Dollar General Corp. (NYSE:DG), and Barrick Gold Corporation (NYSE:GOLD). This group of stocks' market caps resemble NEM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DE,32,839882,-12 MELI,60,4427510,0 KMB,37,1173794,-9 ABB,10,346451,0 SPOT,36,1882209,-4 DG,67,2296237,7 GOLD,52,3360658,-2 Average,42,2046677,-2.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $2047 million. That figure was $2418 million in NEM's case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Newmont Corporation (NYSE:NEM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEM is 79.5. 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 positive signal but 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 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately NEM wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NEM were disappointed as the stock returned 1.9% since the end of June (through 10/16) 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 many of these stocks already outperformed the market so far this year.

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

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