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Monster Quarter for Sun Valley Gold As Materials Bets Pay Off Handsomely

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Sun Valley Gold is an Idaho-based hedge fund founded by Peter Franklin Palmedo in 1999. Before launching his firm, Mr. Palmedo worked for Morgan Stanley in New York as a Principal from 1981 to 1989. He has also served as the Chairman of the Board and Member of the Audit Committee of American Gold Capital Corporation. Sun Valley Gold, as the name suggests, invests almost exclusively in the metals and mining industries. The fund manages a U.S. equity portfolio with holdings valued at $381.48 million on June 30, down from $624.58 million on March 31. However, the huge decline wasn’t due to performance, as our data shows that the fund’s 11 long positions in stocks on March 31 which were valued at $1 billion or more delivered astounding weighted average returns of 47.2% during the second quarter, pushing its first-half gains using our calculations to 72.8%.

Gold-related stocks have been punished lately however, as investors yearn for clues regarding the timing of a rate hike, which were not overly prevalent during Janet Hellen’s speech at Jackson Hole on Friday. A rising dollar and lack of yields make gold unattractive for investors during a rate hike environment. With that said, let’s examine the latest 13F filing from Sun Valley Gold and analyze the performance of its top stock picks during the second quarter.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

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Silver Standard Resources Inc. (USA) (NASDAQ:SSRI)

– Shares Owned by Sun Valley Gold (as of June 30): 3.22 million

– Value of Sun Valley Gold’s Holding (as of June 30): $41.88 million

Sun Valley Gold sold 666,033 shares of Silver Standard Resources Inc. (USA) (NASDAQ:SSRI) in the second quarter, ending the period with $41.88 million worth in shares. On Tuesday, MO Capital Markets upgraded Standard Resources Inc. (USA) (NASDAQ:SSRI) to ‘Outperform’ from ‘Market Perform’, along with a price target of $19, suggesting upside potential of nearly 50%, despite the stock already being up by 148% since the start of 2016, which included a monstrous 134% gain in the second quarter. A total of 14 hedge funds in our database had amassed $158.9 million worth of Silver Standard Resources’ stock as of the end of the second quarter.

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Asanko Gold Inc (NYSEMKT:AKG)

– Shares Owned by Sun Valley Gold (as of June 30): 11.11 million

– Value of Sun Valley Gold’s Holding (as of June 30): $42.48 million

Sun Valley Gold trimmed its stake in Asanko Gold Inc (NYSEMKT:AKG) by 23% during the second quarter, selling around 3.43 million shares of the Canadian gold exploration company. Asanko produced 36,337 ounces of gold during the first quarter, in-line with guidance of 35,000-to-40,000 ounces. Asanko Gold Inc (NYSEMKT:AKG) also reiterated its guidance of 90,000-to-100,000 ounces of gold production for the second-half of the year. At the end of the second quarter, a total of eight hedge funds in our database were long Asanko Gold Inc (NYSEMKT:AKG), coming off a second quarter in which shares gained 83%.

On the next page, we’ll continue our discussion of the performance of Sun Valley’s stock picks in the June quarter.

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