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.
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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.
3. Turquoise Hill Resources Ltd (NYSE:TRQ)
Investors with Long Positions (as of June 30): 25
Aggregate Value of Investors’ Holdings (as of June 30): $697.41 Million
Four more hedge funds within our database had Turquoise Hill Resources Ltd (NYSE:TRQ) in their portfolios at the end of the second quarter than at the start, while the value of the overall investments in the company increased from $667.74 million. On May 18, Turquoise Hill, the Government of Mongolia, and Rio Tinto plc (ADR) (NYSE:RIO) announced the signing of the Oyu Tolgoi Underground Mine Development and Financial Plan, settling the dispute over the underground expansion of the Oyu Tolgoi copper and gold mine. Turquoise Hill, which owns 66% of Oyu Tolgoi, will definitely benefit immensely from this deal. The shares of the company have lost slightly over 3% since the beginning of the year, greatly outperforming its industry peers (the gold industry has lost 29% year-to-date). Kenneth Mario Garschina’s Mason Capital Management is among the largest shareholders of Turquoise Hill Resources Ltd (NYSE:TRQ), with 23.31 million shares as of June 30
2. Newmont Mining Corp (NYSE:NEM)
Investors with Long Positions (as of June 30): 38
Aggregate Value of Investors’ Holdings (as of June 30): $627.88 Million
Newmont Mining Corp (NYSE:NEM) also received a strong vote of confidence from the hedge funds observed by our team, as the total number of investors with stakes in the company increased to 38 from 35 during the second quarter. Likewise, the value of these stakes increased to $627.88 million from $605.54 million over the same period. Newmont’s stock has lost some value this year, dropping by 14% year-to-date. Nevertheless, the company was recently ranked as the mining industry’s leader in overall sustainability by the Dow Jones Sustainability World Index (DJSI World). Even so, the weaker global and Chinese demand for base metals, such as copper, has put significant downward pressure on the company’s stock. Bruce Kovner’s Caxton Associates LP acquired a 1.18 million-share stake in Newmont Mining Corp (NYSE:NEM) during the latest quarter.
1.Barrick Gold Corporation (USA) (NYSE:ABX)
Investors with Long Positions (as of June 30): 42
Aggregate Value of Investors’ Holdings (as of June 30): $1.64 Billion
Barrick Gold Corporation (USA) (NYSE:ABX) is the most popular gold stock among the hedge funds tracked by the Insider Monkey team, with 42 investors holding positions in the stock at the end of the second quarter, up by one quarter-over-quarter. Similarly, the value of these positions increased by $223 million. The shares of Barrick Gold have been on a downtrend over the last few months alongside the price of gold. To be more detailed, the stock has declined by nearly 41% since the start of 2015. However, this stock might represent a good buying opportunity, as Barrick Gold anticipates an all-in-sustaining-cost of $840-to-$880 per ounce this year, which suggests that the company still generates massive piles of cash given the current level of gold prices. From the pool of over 700 hedge funds within our database, First Eagle Investment Management, founded by Jean-Marie Eveillard, is by far the largest equity holder of Barrick Gold Corporation (USA) (NYSE:ABX), with 40.38 million shares as of June 30.
Disclosure: None
