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Did Hedge Funds Drop The Ball On Eldorado Gold Corp (EGO) ?

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Eldorado Gold Corp (NYSE:EGO) and see how it was affected.

Eldorado Gold Corp (NYSE:EGO) was in 8 hedge funds’ portfolios at the end of the fourth quarter of 2018. EGO investors should be aware of a decrease in support from the world’s most elite money managers lately. There were 9 hedge funds in our database with EGO holdings at the end of the previous quarter. Our calculations also showed that EGO isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

We’re going to go over the recent hedge fund action surrounding Eldorado Gold Corp (NYSE:EGO).

What have hedge funds been doing with Eldorado Gold Corp (NYSE:EGO)?

Heading into the first quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EGO over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

EGO_apr2019

More specifically, Renaissance Technologies was the largest shareholder of Eldorado Gold Corp (NYSE:EGO), with a stake worth $2 million reported as of the end of September. Trailing Renaissance Technologies was Roumell Asset Management, which amassed a stake valued at $0.8 million. D E Shaw, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Since Eldorado Gold Corp (NYSE:EGO) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their full holdings by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $1.2 million in stock. Robert Polak’s fund, Anchor Bolt Capital, also sold off its stock, about $0.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Eldorado Gold Corp (NYSE:EGO) but similarly valued. These stocks are Yamana Gold Inc. (NYSE:AUY), NuStar Energy L.P. (NYSE:NS), Penn National Gaming, Inc (NASDAQ:PENN), and Pan American Silver Corp. (NASDAQ:PAAS). All of these stocks’ market caps are closest to EGO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AUY 19 78472 1
NS 2 4998 0
PENN 18 103334 -6
PAAS 15 152840 0
Average 13.5 84911 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $4 million in EGO’s case. Yamana Gold Inc. (NYSE:AUY) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 2 bullish hedge fund positions. Eldorado Gold Corp (NYSE:EGO) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on EGO as the stock returned 44.1% and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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