Is Southern Copper Corp (SCCO) Going to Burn These Hedge Funds?

Is Southern Copper Corp (NYSE:SCCO) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the latest market-moving information.

Is Southern Copper Corp (NYSE:SCCO) the right pick for your portfolio? The smart money is actually actually turning less bullish. The number of long hedge fund bets that are revealed through the 13F filings retreated by 1 recently. There were 13 hedge funds in our database with SCCO holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sirius XM Holdings Inc (NASDAQ:SIRI), L Brands Inc (NYSE:LB), and Omnicom Group Inc. (NYSE:OMC) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s take a look at the new action surrounding Southern Copper Corp (NYSE:SCCO).

What have hedge funds been doing with Southern Copper Corp (NYSE:SCCO)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SCCO over the last 5 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Millennium Management, one of the 10 largest hedge funds in the world, has the biggest position in Southern Copper Corp (NYSE:SCCO), worth close to $20 million, corresponding to less than 0.1% of its total 13F portfolio. On Millennium Management’s heels is D E Shaw holding a $12 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish contain Cliff Asness’ AQR Capital Management, Jim Simons’ Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Judging by the fact that Southern Copper Corp (NYSE:SCCO) has faced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few fund managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management cashed in the largest position of the “upper crust” of funds watched by Insider Monkey, worth about $21.4 million in stock, and Steve Cohen’s Point72 Asia (Singapore) was right behind this move, as the fund dumped about $18.2 million worth of shares.

Let’s now review hedge fund activity in other stocks similar to Southern Copper Corp (NYSE:SCCO). We will take a look at Sirius XM Holdings Inc (NASDAQ:SIRI), L Brands Inc (NYSE:LB), Omnicom Group Inc. (NYSE:OMC), and Hormel Foods Corporation (NYSE:HRL). All of these stocks’ market caps resemble SCCO’s market cap.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $913 million. That figure was $75 million in SCCO’s case. L Brands Inc (NYSE:LB) is the most popular stock in this table. On the other hand Omnicom Group Inc. (NYSE:OMC) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Southern Copper Corp (NYSE:SCCO) is even less popular than OMC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.