Hedge Funds’ Top Precious Metal Plays: Freeport-McMoRan Copper & Gold Inc. (FCX), Barrick Gold Corporation (ABX), Goldcorp Inc. (GG)

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Insider Monkey has processed hundreds of 13F filings from hedge funds and other notable investors for the fourth quarter of 2012; these filings disclose many long equity positions, which the investor in question held at the end of December. By aggregating 13F filings, we can develop investment strategies including imitating hedge funds’ most popular stocks in various categories. The most popular small-cap stocks among hedge funds stand out in particular; these stocks outperformed the S&P 500 by 18 percentage points per year between 1999 and 2009 (see how to use this market-beating strategy yourself).

BRIDGEWATER ASSOCIATES

Another way to use this information is by pooling the filings and seeing which stocks in different sectors were the most popular among the filers that we consider. Here are the top five stocks in the precious metals industry that the largest number of hedge funds owned at the end of December.

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is a copper, gold and molybdenum mining company.  The company has large open-pit and underground mining operations in North America, South America and Africa. Freeport-McMoRan released its Q4 earnings in late January, announcing that net income attributable to common stock for Q4 of 2012 was $743 million, or $0.78 per share, compared with net income of $640 million, or $0.67 per share, for Q4 of 2011. Net income for the year 2012 was lower at $3.0 billion, $3.19 per share, compared with $4.6 billion, $4.78 per share, for 2011.

The more interesting recent news for Freeport-McMoran is its proposed acquisition of Plains Exploration and Production Co. and McMoRan Exploration Company. These acquisitions would expand Freeport-McMoRan’s activities into oil and gas exploration and development.  McMoRan was spun-off as a separate company in 1994, and thus the proposed acquisition would bring McMoRan back into the fold.

The market initially disapproved of the proposed acquisitions, as Freeport-McMoRan’s stock price dropped approximately 15% upon the announcement in early December. Many investors have previously viewed this as a proxy for copper, and the recent drop in both copper and gold prices may be a partial explanation for this recent downward movement.

Still, much of Freeport-McMoRan’s stock price movement may be influenced by hedgies engaged in merger-arbitrage strategies in connection with the proposed acquisitions. At the end of Q4, some funds increased their holdings in the company, including Ray Dalio (see Dalio and Bridgewater’s full equity portfolio).

Next up on our list we have Newmont Mining Corp (NYSE:NEM), which is a gold producer, with gold and copper properties in the U.S., Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Newmont recently released earnings, reporting net income from continuing operations of $1.9 billion or $3.80 per share in 2012, compared with $0.5 billion, or $1.02 per share in 2011. Revenue for 2012 was $9.9 Billion, versus $10.4 billion for 2011.

Newmont reported attributable gold production of 5 million ounces, and copper production of 143 million pounds for 2012. The company’s share price has dropped recently, likely in concert with the drop in the price of gold.  Some hedge funds have recently decreased their positions in the company; Libra Advisors recently cut its holdings in Newmont, but still holds a decently sized stake (see this hedge fund’s newest picks).

Let’s see what No.’s 3, 4 and 5 are on this list.

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