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Did Hedge Funds Drop The Ball On Sibanye Gold Ltd (SBGL)?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Sibanye Gold Ltd (NYSE:SBGL).

Sibanye Gold Ltd (NYSE:SBGL) was in 9 hedge funds’ portfolios at the end of June. SBGL investors should pay attention to a decrease in hedge fund interest lately. There were 12 hedge funds in our database with SBGL holdings at the end of the previous quarter. Our calculations also showed that SBGL isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the recent hedge fund action surrounding Sibanye Gold Ltd (NYSE:SBGL).

Hedge fund activity in Sibanye Gold Ltd (NYSE:SBGL)

At Q2’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SBGL over the last 16 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

SBGL_oct2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the number one position in Sibanye Gold Ltd (NYSE:SBGL), worth close to $32.3 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $15.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Renaissance Technologies, Noam Gottesman’s GLG Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Seeing as Sibanye Gold Ltd (NYSE:SBGL) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that slashed their entire stakes by the end of the second quarter. Intriguingly, Matthew Hulsizer’s PEAK6 Capital Management cut the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at close to $0.2 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund sold off about $0.1 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks similar to Sibanye Gold Ltd (NYSE:SBGL). We will take a look at FireEye Inc (NASDAQ:FEYE), Exponent, Inc. (NASDAQ:EXPO), Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), and CenterState Banks Inc (NASDAQ:CSFL). This group of stocks’ market values resemble SBGL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FEYE 29 345965 2
EXPO 15 108248 -3
ARNA 29 346300 7
CSFL 15 103667 -1
Average 22 226045 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $226 million. That figure was $93 million in SBGL’s case. FireEye Inc (NASDAQ:FEYE) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Sibanye Gold Ltd (NYSE:SBGL) is even less popular than EXPO. Hedge funds clearly dropped the ball on SBGL as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on SBGL as the stock returned 13.7% during the third quarter and outperformed the market by an even larger margin.

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

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