Sprott Asset Management is hedge fund with a history of delivering outstanding long-term performance to its clients. It had its origins in Sprott Securities Ltd., a brokerage firm founded in 1981 by Eric Sprott, who still manages the fund. Sprott Inc. manages approximately $7.7 billion in assets, while Sprott Asset Management last disclosed an equity portfolio (for the second quarter of 2014) worth more than $1.6 billion, mainly focused on stocks from the financial sector, which account for almost 45% of its total equity portfolio. Its four largest bets are placed on ETFs and options; however, in this article we will take a look at its biggest long equity positions, which do not belong to the financial sector: Fortuna Silver Mines Inc. (NYSE:FSM), First Majestic Silver Corp (NYSE:AG) and CGI Group Inc. (USA) (NYSE:GIB).
Fortuna Silver Mines Inc. (NYSE:FSM) and First Majestic Silver Corp (NYSE:AG) traded places during the second quarter. Fortuna, which was second in the previous quarter’s list is now first, even in spite of a 1% reduction in Sprott’s stake. The fund last disclosed ownership of 9.05 million shares of common stock, worth almost $50 million, which account for approximately 3% of the fund’s equity portfolio’s total value. This stake makes it the largest hedge fund shareholder of record, amongst those that we track.
Another major fund bullish on this $578 million market cap silver miner is D E Shaw, which owns 412,400 shares of Fortuna Silver Mines Inc. (NYSE:FSM), after boosting its exposure by 22% over the second quarter of 2014.
Despite Fortuna Silver Mines Inc. (NYSE:FSM)’s negative margins and returns, analysts seem to feel bullish about its future. Morningstar analysts have rated the stock –in average- as an “outperform,” while CIBC has issued an “outperform” rating in mid-January.
First Majestic Silver Corp (NYSE:AG) fell one position over the second quarter, following a 5% reduction in Sprott’s wage. The fund owns 4.33 million shares of this $1.1 billion market cap silver producer, which make it –once again- the largest hedge fund shareholder of record, trailed by Israel Englander’s Millennium Management, which more than doubled its stake over the second quarter and now holds 235,530 shares of the company.
The stock traded at low prices in the second quarter, and has not fully recuperated since then, even in spite of strong operational results. Despite this weakness, and several estimates downgrades, analysts still seem to like First Majestic Silver Corp (NYSE:AG). Consensus estimates point towards a ‘Buy’ rating on the stock.
Last in this list is CGI Group Inc. (USA) (NYSE:GIB), a $10 billion market cap IT and business consulting services provider. The company saw Sprott augment its exposure by 25% over the second quarter, to 958,060 Class A shares. Yet again, Mr. Sprott is the largest hedge fund shareholder of record, trailed by Joel Greenblatt’s Gotham Asset Management. However, this last fund does not seem as bullish, since it last disclosed a 31% reduction in its stake in the company.
CGI Group Inc. (USA) (NYSE:GIB) looks quite attractive for a fundamental point of view. Deeply embedded in government agencies across North America and Europe, carrying a backlog of signed contracts of more than $17.3 billion, and trading below average valuations, this looks like a stock to buy and hold for the long-term.
Disclosure: Javier Hasse holds no positions in any stocks or funds mentioned.