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We All Know Sprott Loves Materials Stocks; Now See What Else It Likes

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Sprott Inc. is a Toronto-based alternative asset manager founded by billionaire Eric Sprott back in 1981. The firm manages approximately $7.4 billion in assets and hold a U.S. public equity portfolio valued at $2.82 billion as of September 30. While Mr. Sprott is no longer involved in his firm’s day-to-day portfolio management operations, his team continues to be bullish on the long-term prospects of precious metals, although to a lesser extent. Materials stocks made up 17% of the fund’s portfolio, more than double any other sector when we discount the fund’s large options positions in the SPY (which are classified as finance sector positions).

Nonetheless, six of the fund’s seven most valuable equity positions were in stocks from other sectors. Given that, we’ll take a look at those holdings, as disclosed in Sprott’s latest 13F filing for the third quarter of 2016.

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At Insider Monkey, we track more than 750 hedge funds, whose 13F filings we analyze as part of our small-cap strategy. Our research has shown that imitating a portfolio that includes the 15 most popular small-cap stocks among hedge funds can outperform the market by as much as 95 basis points per month on average (see more details).

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CVS Health Corp (NYSE:CVS)

Shares Held by Sprott Inc. (as of September 30): 418,500

Value of Sprott Inc.’s Position (as of September 30): $37.24 million

Let’s start with CVS Health Corp (NYSE:CVS), a position that Sprott opened in the fourth quarter of 2014, and in which the fund increased its position very slightly during the third quarter of 2016. In addition to the 418,500 shares which Sprott was long, the firm also held put options underlying 180,400 shares. Harris Associates held 5.08 million shares of the stock on June 30, while Jim Simons’ Renaissance Technologies owned 3.84 million shares.

CVS Health Corp (NYSE:CVS) has not done great since the third quarter ended, losing almost 6.9% of its value in October. Last week, shares hit a 52-week-low of $82.55, ahead of the release of its third-quarter earnings report next week. The Street is modeling consensus EPS of $1.57, up from $1.29 posted in the same quarter of last year, on revenue of $45.31 billion, versus $38.64 billion in sales recorded a year earlier.

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Medtronic PLC (NYSE:MDT)

Shares Held by Sprott Inc. (as of September 30): 444,100

Value of Sprott Inc.’s Position (as of September 30): $38.37 million

Next up is Medtronic PLC (NYSE:MDT), in which Sprott sold 2,900 shares over the third quarter, lowering its holding to 444,100 shares, in addition to put options underlying 202,600 shares. Another fund that is bullish on the company is Charles Paquelet’s Skylands Capital, which owned 35,245 shares, or about $3 million in stock, as of September 30.

Similar to its peer above, shares of Medtronic PLC (NYSE:MDT) have lost almost 6.2% since the end of the third quarter, largely on the back of lithium cluster concerns. On Tuesday, the company announced that the FDA had approved an IDE study initiation, after the release of positive results from Medtronic’s first-of-its-kind early feasibility study for the Harmony(TM) Transcatheter Pulmonary Valve (TPV).

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We’ll check out three more non-materials stocks that Sprott loves on the next page.

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