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Did Hedge Funds Make The Right Call On Kinross Gold Corporation (KGC)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Kinross Gold Corporation (NYSE:KGC) and determine whether hedge funds skillfully traded this stock.

Kinross Gold Corporation (NYSE:KGC) has experienced an increase in hedge fund sentiment recently. Our calculations also showed that KGC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are viewed as underperforming, outdated investment tools of years past. While there are more than 8000 funds with their doors open today, We choose to focus on the elite of this group, around 850 funds. Most estimates calculate that this group of people control the majority of the hedge fund industry’s total capital, and by keeping an eye on their best equity investments, Insider Monkey has found a number of investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the latest hedge fund action regarding Kinross Gold Corporation (NYSE:KGC).

How have hedgies been trading Kinross Gold Corporation (NYSE:KGC)?

At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KGC over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

The largest stake in Kinross Gold Corporation (NYSE:KGC) was held by Renaissance Technologies, which reported holding $251.1 million worth of stock at the end of September. It was followed by Sprott Asset Management with a $44.2 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Sprott Asset Management allocated the biggest weight to Kinross Gold Corporation (NYSE:KGC), around 4.05% of its 13F portfolio. Odey Asset Management Group is also relatively very bullish on the stock, earmarking 3.85 percent of its 13F equity portfolio to KGC.

Consequently, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Kinross Gold Corporation (NYSE:KGC). Marshall Wace LLP had $2.1 million invested in the company at the end of the quarter. John Horseman’s Horseman Capital Management also initiated a $1.5 million position during the quarter. The other funds with brand new KGC positions are Joel Greenblatt’s Gotham Asset Management, Donald Sussman’s Paloma Partners, and Ali Motamed’s Invenomic Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Kinross Gold Corporation (NYSE:KGC) but similarly valued. These stocks are Pentair plc (NYSE:PNR), Morningstar, Inc. (NASDAQ:MORN), Kemper Corporation (NYSE:KMPR), and Levi Strauss & Co. (NYSE:LEVI). This group of stocks’ market values are closest to KGC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PNR 29 391097 3
MORN 13 235862 -8
KMPR 13 48502 -7
LEVI 11 34012 0
Average 16.5 177368 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $447 million in KGC’s case. Pentair plc (NYSE:PNR) is the most popular stock in this table. On the other hand Levi Strauss & Co. (NYSE:LEVI) is the least popular one with only 11 bullish hedge fund positions. Kinross Gold Corporation (NYSE:KGC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on KGC as the stock returned 81.4% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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