Did Hedge Funds Drop The Ball On Silvercorp Metals Inc. (SVM) ?

We can judge whether Silvercorp Metals Inc. (NYSE:SVM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Hedge fund interest in Silvercorp Metals Inc. (NYSE:SVM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare SVM to other stocks including Universal Logistics Holdings, Inc. (NASDAQ:ULH), Casa Systems, Inc. (NASDAQ:CASA), and TPI Composites, Inc. (NASDAQ:TPIC) to get a better sense of its popularity.

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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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the new hedge fund action regarding Silvercorp Metals Inc. (NYSE:SVM).

Hedge fund activity in Silvercorp Metals Inc. (NYSE:SVM)

Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SVM over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the number one position in Silvercorp Metals Inc. (NYSE:SVM). Renaissance Technologies has a $20.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $9.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, Eric Sprott’s Sprott Asset Management and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Sprott Asset Management allocated the biggest weight to Silvercorp Metals Inc. (NYSE:SVM), around 0.57% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to SVM.

Judging by the fact that Silvercorp Metals Inc. (NYSE:SVM) has faced declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace dropped the biggest stake of the 750 funds watched by Insider Monkey, worth about $1.8 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Silvercorp Metals Inc. (NYSE:SVM) but similarly valued. These stocks are Universal Logistics Holdings, Inc. (NASDAQ:ULH), Casa Systems, Inc. (NASDAQ:CASA), TPI Composites, Inc. (NASDAQ:TPIC), and Peoples Bancorp Inc. (NASDAQ:PEBO). All of these stocks’ market caps match SVM’s market cap.

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As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $37 million in SVM’s case. TPI Composites, Inc. (NASDAQ:TPIC) is the most popular stock in this table. On the other hand Peoples Bancorp Inc. (NASDAQ:PEBO) is the least popular one with only 7 bullish hedge fund positions. Silvercorp Metals Inc. (NYSE:SVM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on SVM as the stock returned 32% during the first two months of Q4 and outperformed the market by an even larger margin.

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