Is Yamana Gold Inc. (NYSE:AUY) 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, 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.
Is Yamana Gold Inc. (NYSE:AUY) undervalued? The best stock pickers are becoming less hopeful. The number of bullish hedge fund positions were cut by 1 lately. Our calculations also showed that auy isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Let's take a peek at the key hedge fund action surrounding Yamana Gold Inc. (NYSE:AUY).
What have hedge funds been doing with Yamana Gold Inc. (NYSE:AUY)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AUY over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Yamana Gold Inc. (NYSE:AUY) was held by Sprott Asset Management, which reported holding $77.6 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $40.3 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and AQR Capital Management.
Since Yamana Gold Inc. (NYSE:AUY) has witnessed bearish sentiment from the aggregate hedge fund industry, it's easy to see that there is a sect of funds that decided to sell off their full holdings in the third quarter. Interestingly, David Halpert's Prince Street Capital Management cut the biggest stake of all the hedgies monitored by Insider Monkey, totaling about $10.6 million in stock. David Andre and Astro Teller's fund, Cerebellum Capital, also cut its stock, about $0.2 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Yamana Gold Inc. (NYSE:AUY) but similarly valued. These stocks are Cabot Corporation (NYSE:CBT), HB Fuller Co (NYSE:FUL), Cimpress NV (NASDAQ:CMPR), and Xenia Hotels & Resorts Inc (NYSE:XHR). This group of stocks' market caps match AUY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBT,20,107789,-9 FUL,18,190088,4 CMPR,11,428204,-7 XHR,9,45662,-4 Average,14.5,192936,-4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $167 million in AUY's case. Cabot Corporation (NYSE:CBT) is the most popular stock in this table. On the other hand Xenia Hotels & Resorts Inc (NYSE:XHR) is the least popular one with only 9 bullish hedge fund positions. Yamana Gold Inc. (NYSE:AUY) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AUY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AUY were disappointed as the stock returned -28.4% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.