The Basic Materials sector has gained 10.69% so far this year. However, the mining industry seems to be treading a different line. ISM’s Non-Manufacturing Business Reports for the first four months of the year show that the industry has been plagued by inventories that have been too high throughout this year. We decided to analyze how hedge funds have incorporated the mining segment into their portfolios given the circumstances, based on their latest 13F filings for the reporting period of March 31. Top bets within the industry included Barrick Gold Corporation (USA) (NYSE:ABX), Newmont Mining Corp (NYSE:NEM), Freeport-McMoRan Inc (NYSE:FCX), Cameco Corporation (USA) (NYSE:CCJ), and Silver Wheaton Corp. (USA) (NYSE:SLW).
Tim Roberts Photography/shutterstock.com
With a total investment of $1.41 billion from 41 hedge funds, Barrick Gold Corporation (USA) (NYSE:ABX) was the most popular mining company among the investment firms in our database as of March 31. In comparison 45 firms had $1.09 billion worth of capital tied up in the company at the end of the fourth quarter. Although down about 25.61% for the past year, Barrick Gold Corporation (USA) (NYSE:ABX)’s stock has appreciated by 14.33% so far this year. The company missed the top and bottom line estimates for its first quarter financial results, while its plan to reduce its debt by at least $3 billion has led Barrick Gold Corporation (USA) (NYSE:ABX) to sell some of its assets including the Cowal mine in Australia which added $550 million to its coffers. Among the hedge funds that we track, Jean-Marie Eveillard‘s First Eagle Investment Management is the largest stockholder of Barrick Gold Corporation (USA) (NYSE:ABX) with some 29.20 million shares valued at $319.99 million.
Newmont Mining Corp (NYSE:NEM) is another mining company that has done well this year, as the stock is up by nearly 15.5% year-to-date. However, the hedge fund ownership in the company decreased to 35 funds with an aggregate investment of $605.54 million from 40 investment firms with $604.53 million a quarter earlier. William B. Gray‘s Orbis Investment Management holds 6.20 million shares of Newmont Mining Corp (NYSE:NEM).
Follow Ken Griffin's Citadel Investment Group
Although a popular choice among hedge funds, Freeport-McMoRan Inc (NYSE:FCX) is losing their confidence also, as only 31 firms were invested in the company, with an aggregate investment of $258.10 million. Those figures are a steep drop from the 49 funds with $615.11 million invested in the company at the end of 2014. The $21.83 billion mining company’s stock is down by nearly 40% over the past year. However, Freeport-McMoRan Inc (NYSE:FCX) might gain ground in the future as the company’s copper growth projects near an inflection point which could lead to significant production increases and decline in costs going forward. Mario Gabelli‘s GAMCO Investors and Ken Griffin‘s Citadel Investment Group are two notable stockholders of Freeport-McMoRan Inc (NYSE:FCX), holding 2.44 million and 2.30 million shares respectively.
Cameco Corporation (USA) (NYSE:CCJ) hasn’t fared well on the stock market either, depreciating by nearly 20% over the past year. A total of 26 hedge funds had $248.26 million invested in the company at the end of March as compared to 28 firms with $187.18 million invested as of the end of 2014. David Iben’s Kopernik Global Investors increased its stake in Cameco Corporation (USA) (NYSE:CCJ) by 58% during the first quarter to 4.91 million shares valued at $68.39 million.
Silver Wheaton Corp. (USA) (NYSE:SLW) also saw a decrease in interest from hedge funds as 24 firms held $216.26 million worth of stock in their portfolios at the end of March as opposed to 26 funds with $235.86 million at the end of 2014. Israel Englander’s Millennium Management added 2.56 million shares of Silver Wheaton Corp. (USA) (NYSE:SLW) to its portfolio during the first three months of the year, taking its total stake to 2.65 million shares valued at $50.38 million. Despite hitting record production in the first quarter, the Canada-based mining company missed the top and bottom line estimates for its first quarter earnings owing to lower commodity prices. Silver Wheaton Corp. (USA) (NYSE:SLW)’s stock has depreciated by nearly 5% so far this year.
Insider Monkey tracks hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. These stocks were able to generate alpha because of their lower risk profile. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month. These stocks were slightly riskier, so their monthly alpha was 80 basis points (read the details here). Since the official launch of our small-cap strategy in August 2012 it has performed just as predicted, returning over 144% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
Disclosure: None
