Did Hedge Funds Make The Right Call On Pan American Silver Corp. (PAAS) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtPan American Silver Corp. (NASDAQ:PAAS) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Hedge fund interest in Pan American Silver Corp. (NASDAQ:PAAS) 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 PAAS to other stocks including American States Water Co (NYSE:AWR), AerCap Holdings N.V. (NYSE:AER), and BOK Financial Corporation (NASDAQ:BOKF) to get a better sense of its popularity.

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to take a glance at the new hedge fund action regarding Pan American Silver Corp. (NASDAQ:PAAS).

What does smart money think about Pan American Silver Corp. (NASDAQ:PAAS)?

At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in PAAS a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is PAAS A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Renaissance Technologies has the largest position in Pan American Silver Corp. (NASDAQ:PAAS), worth close to $108.8 million, accounting for 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is Sprott Asset Management, managed by Eric Sprott, which holds a $85.1 million position; the fund has 7.8% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise David Greenspan’s Slate Path Capital, Ken Griffin’s Citadel Investment Group and Vadim Rubinchik’s Brightlight Capital. In terms of the portfolio weights assigned to each position Greywolf Capital Management allocated the biggest weight to Pan American Silver Corp. (NASDAQ:PAAS), around 20.97% of its 13F portfolio. Sloane Robinson Investment Management is also relatively very bullish on the stock, earmarking 14 percent of its 13F equity portfolio to PAAS.

Judging by the fact that Pan American Silver Corp. (NASDAQ:PAAS) has faced a decline in interest from the smart money, it’s safe to say that there is a sect of hedge funds that slashed their entire stakes last quarter. Interestingly, Mark Broach’s Manatuck Hill Partners dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $1.2 million in stock. Minhua Zhang’s fund, Weld Capital Management, also sold off its stock, about $0.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pan American Silver Corp. (NASDAQ:PAAS) but similarly valued. We will take a look at American States Water Co (NYSE:AWR), AerCap Holdings N.V. (NYSE:AER), BOK Financial Corporation (NASDAQ:BOKF), and FirstCash, Inc. (NASDAQ:FCFS). All of these stocks’ market caps resemble PAAS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AWR 19 50907 -2
AER 32 616402 -4
BOKF 22 145009 7
FCFS 16 107030 0
Average 22.25 229837 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $341 million in PAAS’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand FirstCash, Inc. (NASDAQ:FCFS) is the least popular one with only 16 bullish hedge fund positions. Pan American Silver Corp. (NASDAQ:PAAS) 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 PAAS as the stock returned 112.6% 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.