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Where Do Hedge Funds Stand On Osisko Gold Royalties Ltd (OR)?

Reymerlyn Martin
·6 min read

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Osisko Gold Royalties Ltd (NYSE:OR).

Osisko Gold Royalties Ltd (NYSE:OR) shareholders have witnessed an increase in activity from the world's largest hedge funds lately. Osisko Gold Royalties Ltd (NYSE:OR) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OR 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.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Eric Sprott Sprott Asset Management
Eric Sprott Sprott Asset Management

Eric Sprott of Sprott Asset Management

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. With all of this in mind we're going to view the new hedge fund action encompassing Osisko Gold Royalties Ltd (NYSE:OR).

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

At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in OR a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, Sprott Asset Management was the largest shareholder of Osisko Gold Royalties Ltd (NYSE:OR), with a stake worth $157.4 million reported as of the end of September. Trailing Sprott Asset Management was Sun Valley Gold, which amassed a stake valued at $26.6 million. Renaissance Technologies, Arrowstreet Capital, 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 Sun Valley Gold allocated the biggest weight to Osisko Gold Royalties Ltd (NYSE:OR), around 11.61% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, earmarking 6.45 percent of its 13F equity portfolio to OR.

As one would reasonably expect, key hedge funds were leading the bulls' herd. Knoll Capital Management, managed by Fred Knoll, created the most outsized position in Osisko Gold Royalties Ltd (NYSE:OR). Knoll Capital Management had $0.5 million invested in the company at the end of the quarter. Mika Toikka's AlphaCrest Capital Management also initiated a $0.2 million position during the quarter. The only other fund with a new position in the stock is Mario Gabelli's GAMCO Investors.

Let's now take a look at hedge fund activity in other stocks similar to Osisko Gold Royalties Ltd (NYSE:OR). These stocks are Tower Semiconductor Ltd. (NASDAQ:TSEM), Olin Corporation (NYSE:OLN), Eidos Therapeutics, Inc. (NASDAQ:EIDX), Main Street Capital Corporation (NYSE:MAIN), Allegiant Travel Company (NASDAQ:ALGT), Cimpress plc (NASDAQ:CMPR), and Inovio Pharmaceuticals Inc (NASDAQ:INO). All of these stocks' market caps match OR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSEM,14,295737,-1 OLN,33,459651,0 EIDX,13,254264,-4 MAIN,4,10635,-3 ALGT,24,344081,1 CMPR,25,260556,0 INO,16,66802,2 Average,18.4,241675,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $244 million in OR's case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 4 bullish hedge fund positions. Osisko Gold Royalties Ltd (NYSE:OR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OR is 59.4. 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 December 14th and surpassed the market again by 15.8 percentage points. Unfortunately OR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OR investors were disappointed as the stock returned -4.7% since the end of September (through 12/14) 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.

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