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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Galiano Gold Inc. (NYSE:GAU) in this article.
Is Galiano Gold Inc. (NYSE:GAU) a bargain? Prominent investors were becoming hopeful. The number of long hedge fund positions inched up by 1 recently. Galiano Gold Inc. (NYSE:GAU) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 10. Our calculations also showed that GAU isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to take a peek at the recent hedge fund action encompassing Galiano Gold Inc. (NYSE:GAU).
What does smart money think about Galiano Gold Inc. (NYSE:GAU)?
At third quarter's end, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the second quarter of 2020. By comparison, 5 hedge funds held shares or bullish call options in GAU a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Sun Valley Gold was the largest shareholder of Galiano Gold Inc. (NYSE:GAU), with a stake worth $32.6 million reported as of the end of September. Trailing Sun Valley Gold was Renaissance Technologies, which amassed a stake valued at $9.1 million. Citadel Investment Group, GAMCO Investors, and Two Sigma Advisors 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 Sun Valley Gold allocated the biggest weight to Galiano Gold Inc. (NYSE:GAU), around 14.22% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to GAU.
As aggregate interest increased, key hedge funds have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in Galiano Gold Inc. (NYSE:GAU). Two Sigma Advisors had $0 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0 million investment in the stock during the quarter.
Let's now review hedge fund activity in other stocks similar to Galiano Gold Inc. (NYSE:GAU). These stocks are Willdan Group, Inc. (NASDAQ:WLDN), Farmers National Banc Corp (NASDAQ:FMNB), Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), CytomX Therapeutics, Inc. (NASDAQ:CTMX), Hooker Furniture Corporation (NASDAQ:HOFT), Americas Gold and Silver Corporation (NYSE:USAS), and OneWater Marine Inc. (NASDAQ:ONEW). This group of stocks' market caps are closest to GAU's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLDN,3,8995,-1 FMNB,9,7526,1 CPRX,17,57604,-5 CTMX,20,74703,-2 HOFT,10,84583,2 USAS,4,6087,-2 ONEW,11,38634,6 Average,10.6,39733,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.6 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $42 million in GAU's case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Willdan Group, Inc. (NASDAQ:WLDN) is the least popular one with only 3 bullish hedge fund positions. Galiano Gold Inc. (NYSE:GAU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GAU is 32.8. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately GAU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GAU investors were disappointed as the stock returned -18.1% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.