Barclays PLC (ADR) (NYSE:BCS) has picked Royal Gold, Inc. (USA) (NASDAQ:RGLD), Steel Dynamics, Inc. (NASDAQ:STLD), and Berry Plastics Group Inc (NYSE:BERY) as top stocks from the metals and mining industry in its latest Americas Top Picks List.
According to Barclays, it prefers gold royalty companies over gold producers because royalty companies are less vulnerable to increasing operating and capital costs. The report says that Royal Gold, Inc. (USA) (NASDAQ:RGLD) is one of the top picks because it continues to deliver growth even at current gold prices, which are expected to be range-bound in the short term. Barclays says that Royal Gold, Inc. (USA) (NASDAQ:RGLD)’s revenue is expected to increase by 40% and free cash flow by around 250% year-over-year in its fiscal year 2016 (which begins today). The report cites the increase in production at Royal Gold, Inc. (USA) (NASDAQ:RGLD)’s Mt. Milligan mine as one of the reasons it expects these positive results. The report also predicts that Royal Gold will raise its dividend again in calendar year 2015 because of its positive growth prospects. Royal Gold currently pays a quarterly dividend of $0.22, giving it a yield of 1.43%.
Steel Dynamics, Inc. (NASDAQ:STLD) is another top pick of Barclays. The banking firm says Steel Dynamics, Inc. (NASDAQ:STLD)’s earnings in the second half of the year are expected to be driven by growing non-residential construction activity. The report says that Steel Dynamics, Inc. (NASDAQ:STLD)’s margins, the acquisition of Severstal’s Columbus mill, and the expansion of special bar quality (SBQ) are some of the primary reasons for its strong position in the market. With the price of raw materials like coking coal and iron ore decreasing around the world because of increased production, Steel Dynamics’ ability to adapt its product portfolio to sustain balanced operating rates and cash flow gives it an edge overs its competitors. Barclays has set a price target of $25 (12% upside from its Tuesday close) for the steel company, and predicts that its earnings growth will surge 36% from 2015 to 2017.
Berry Plastics Group Inc (NYSE:BERY) is another company listed in Barclays’ Americas Top Picks List. The banking firm has set a price target of $43 on the plastic packaging products company. Product acceptance and focus of debt paydown by Berry Plastics Group Inc (NYSE:BERY) are the two primary reasons cited in the report for the expected growth. The report says that Berry Plastics Group Inc (NYSE:BERY)’s volumes could still experience an increase. The company has also started using all the deleveraging opportunities at its disposal, and should reach its leverage target of 2-4x early next year, the report suggests.
While deciding a bet on any stock, we should include multiple sources and important metrics like hedge funds’ activity and insider sentiment, instead of relying on a single source. With that mind, let’s see how the smart money has been trading these stocks recently.
16 of the hedge funds tracked by Insider Monkey held long positions in Royal Gold, Inc. (USA) (NASDAQ:RGLD) by the end of the first quarter of 2015, whereas 18 hedge funds had positions in the company in the previous quarter. This shows an 11% decrease in the holdings by hedge funds in the company. 31 hedge funds we track were bullish in Steel Dynamics by the end of March, whereas 32 hedge funds were betting on the company in the previous quarter, which depicts a slight decrease in hedge funds’ sentiment. 52 of the hedge funds tracked by Insider Monkey had long positions in Berry Plastics Group Inc (NYSE:BERY), which was unchanged compared to the previous quarter.
We at Insider Monkey strongly believe in the importance and value of tracking hedge funds’ positions in companies because hedge funds spend large amounts of resources, time, and money to decide their bets on companies. Our experts analyzed the historical stock picks of small-cap companies made by hedge funds and found out that the funds performed far better betting on these companies than they did on large-cap stocks, which is where most of their money is invested and why their performances as a whole have been poor for a number of years. A portfolio of the 15 most popular small-cap stocks among funds outperformed the S&P 500 Total Return Index by 95 basis points per month between 1999 and 2012 in backtesting. The exceptional results of this strategy got even better in forward testing after the strategy went live at the end of August 2012, returning more than 135% and beating the market by more than 80 percentage points since then, and by 4.6 percentage points in the first quarter of this year. (see more details about this)
There was no insider activity recorded for Royal Gold or Steel Dynamics in 2015. There was heightened insider selling activity recorded for Berry Plastics Group Inc (NYSE:BERY) in May however. James Till, the EVP of the company, sold 2,445 shares at $35.11 per share on May 21. President William Norman sold 30,741 shares of the company at $34.92 per share on May 19.
Let’s have a detailed look at the hedge funds’ activity around Royal Gold, Inc. (USA) (NASDAQ:RGLD), Steel Dynamics, Inc. (NASDAQ:STLD), and Berry Plastics Group Inc (NYSE:BERY).
Details of Hedge Fund Activity in Royal Gold, Inc. (USA) (NASDAQ:RGLD), Steel Dynamics, Inc. (NASDAQ:STLD), and Berry Plastics Group Inc (NYSE:BERY)
According to hedge fund experts at Insider Monkey, Murray Stahl‘s Horizon Asset Management had the biggest position in Royal Gold, Inc. (USA) (NASDAQ:RGLD), worth close to $38.6 million, corresponding to 0.5% of its total 13F portfolio. Israel Englander’s Millennium Management has the second-largest stake in the company, worth $24.7 million. Ken Griffin’s Citadel Investment Group, Ray Dalio’s Bridgewater Associates, and Benjamin A. Smith’s Laurion Capital Management are some of the other notable hedge funds having stakes in the company.
Of the funds tracked by Insider Monkey, Anchor Bolt Capital managed by Robert Polak, holds the biggest position in Berry Plastics Group Inc (NYSE:BERY), worth $90.4 million, which is 3.7% of its 13F portfolio. David E. Shaw’s D.E. Shaw has $80 million in shares of the company. Israel Englander‘s Millennium Management, Ross Margolies’ Stelliam Investment Management and Robert Pohly’s Samlyn Capital are some of the other notable hedge funds having stakes in the company.
Legg Mason Capital Management has the biggest stake in Steel Dynamics, Inc. (NASDAQ:STLD), worth around $92.9 million, which makes up 1.6% of its total 13F portfolio. Citadel Investment Group managed by Ken Griffin has the second-largest stake in the steel company, worth $83.3 million. Israel Englander’s Millennium Management, Jonathan Barrett and Paul Segal’s Luminus Management, and Cliff Asness’ AQR Capital Management are some of the other famous hedge funds having stakes in the company.