The price of gold has been on a downfall since late 2011, primarily triggered by the revitalizing U.S. economy, the steady uptrend in the stock markets, and more recently, the strengthening U.S dollar. A potential September rate hike might also put some downward pressure on gold, as investors might be tempted to cash out their gold holdings in order to invest in more attractive alternative investments. However, there are growing concerns of a new round of currency wars and the possibility of a rake hike is minimal, which could in turn spur new demand for the so-called storer of wealth. It’s also commonly known that investors tend to look at gold as a safe haven during times of economic and political turmoil, but it is still hard to predict where gold prices will go in the years ahead. In the meantime, we identified five gold stocks that hedge funds have been piling into lately. Thus, in the following article we will display a list of five glittering gold stocks investors should consider, ranked by their popularity among the smart money tracked by Insider Monkey.
Sashkin/Shutterstock.com
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 118% over the last 36 months and outperformed the S&P 500 Index by more than 60 percentage points (see the details here).
5. Kinross Gold Corporation (USA) (NYSE:KGC)
Investors with Long Positions (as of June 30): 23
Aggregate Value of Investors’ Holdings (as of June 30): $227.77 Million
There were 23 hedge funds within our database that owned stakes in Kinross Gold Corporation (USA) (NYSE:KGC) at the end of the second quarter, four more than in the prior quarter. Nevertheless, the value of the collective stakes shrank from $284.54 million over this time span. This decrease was primarily impacted by the falling share price of the gold miner, which has dropped by 46% year-to-date. Kinross Gold Corporation (USA) (NYSE:KGC)’s production in the second quarter stood at 660,898 gold equivalent ounces, down from 679,831 ounces in the same quarter a year ago. Similarly, the company’s revenues decreased to $755.2 million from $911.9 million registered a year ago. Ken Griffin’s Citadel Investment Group augmented its stake by 17% during the second quarter to nearly 1.42 million shares.
4. Goldcorp Inc. (USA) (NYSE:GG)
Investors with Long Positions (as of June 30): 24
Aggregate Value of Investors’ Holdings (as of June 30): $848.23 Million
19 hedge funds and other investors tracked by Insider Monkey had positions in Goldcorp Inc. (USA) (NYSE:GG) at the end of the first quarter, when the value of these positions added up to $803.73 million. Goldcorp’s stock performance has not been any better so far this year, as the shares have lost nearly 32% year-to-date. However, given that Goldcorp reported all-in sustaining costs of $846 per ounce in the second quarter and gold prices are trading around $1,100 per ounce, the company is not doing that badly. At the same time, the company’s gold production in the second quarter came to 908,000 ounces, up from 648,700 ounces reported a year ago. David Iben’s Kopernik Global Investors initiated a new position in Goldcorp Inc. (USA) (NYSE:GG) during the second quarter, consisting of 595,395 shares.
