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Where Do Hedge Funds Stand On Sandstorm Gold Ltd. (SAND)?

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Debasis Saha
·7 min read
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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Sandstorm Gold Ltd. (NYSE:SAND).

Is Sandstorm Gold Ltd. (NYSE:SAND) the right pick for your portfolio? Prominent investors were in a pessimistic mood. The number of long hedge fund bets retreated by 3 recently. Sandstorm Gold Ltd. (NYSE:SAND) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 16. Our calculations also showed that SAND 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.

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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

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 take a gander at the fresh hedge fund action surrounding Sandstorm Gold Ltd. (NYSE:SAND).

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

At the end of September, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the second quarter of 2020. By comparison, 15 hedge funds held shares or bullish call options in SAND a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SAND A Good Stock To Buy?
Is SAND A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Sandstorm Gold Ltd. (NYSE:SAND), with a stake worth $30.3 million reported as of the end of September. Trailing Renaissance Technologies was Sprott Asset Management, which amassed a stake valued at $25 million. Horizon Asset Management, D E Shaw, and Royce & Associates 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 Brightlight Capital allocated the biggest weight to Sandstorm Gold Ltd. (NYSE:SAND), around 2.78% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 1.02 percent of its 13F equity portfolio to SAND.

Seeing as Sandstorm Gold Ltd. (NYSE:SAND) has faced bearish sentiment from hedge fund managers, we can see that there was a specific group of money managers that elected to cut their positions entirely last quarter. At the top of the heap, Ken Heebner's Capital Growth Management dumped the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $22.1 million in stock, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors was right behind this move, as the fund sold off about $9.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Sandstorm Gold Ltd. (NYSE:SAND) but similarly valued. These stocks are Healthcare Services Group, Inc. (NASDAQ:HCSG), Owens & Minor, Inc. (NYSE:OMI), Enviva Partners, LP (NYSE:EVA), Albany International Corp. (NYSE:AIN), Vital Farms, Inc. (NASDAQ:VITL), ChampionX Corporation (NYSE:CHX), and PennyMac Mortgage Investment Trust (NYSE:PMT). This group of stocks' market values are closest to SAND's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCSG,23,130910,-4 OMI,19,233340,4 EVA,6,44281,-2 AIN,17,46431,-2 VITL,11,58142,11 CHX,27,383178,-3 PMT,19,56218,4 Average,17.4,136071,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $119 million in SAND's case. ChampionX Corporation (NYSE:CHX) is the most popular stock in this table. On the other hand Enviva Partners, LP (NYSE:EVA) is the least popular one with only 6 bullish hedge fund positions. Sandstorm Gold Ltd. (NYSE:SAND) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SAND is 43. 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 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately SAND wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SAND investors were disappointed as the stock returned -9.8% since the end of September (through 12/8) 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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