Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Kirkland Lake Gold Ltd. (NYSE:KL).
Is Kirkland Lake Gold Ltd. (NYSE:KL) going to take off soon? Money managers are turning bullish. The number of bullish hedge fund positions moved up by 5 recently. Our calculations also showed that kl isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to analyze the key hedge fund action encompassing Kirkland Lake Gold Ltd. (NYSE:KL).
Hedge fund activity in Kirkland Lake Gold Ltd. (NYSE:KL)
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards KL over the last 13 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.
Among these funds, Polar Capital held the most valuable stake in Kirkland Lake Gold Ltd. (NYSE:KL), which was worth $36.2 million at the end of the third quarter. On the second spot was D E Shaw which amassed $36 million worth of shares. Moreover, Millennium Management, Two Sigma Advisors, and Greywolf Capital Management were also bullish on Kirkland Lake Gold Ltd. (NYSE:KL), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, specific money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Kirkland Lake Gold Ltd. (NYSE:KL). Marshall Wace LLP had $6.9 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $2.9 million position during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves’s BlueCrest Capital Mgmt., David Costen Haley’s HBK Investments, and Matthew Tewksbury’s Stevens Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Kirkland Lake Gold Ltd. (NYSE:KL). These stocks are Spectrum Brands Holdings, Inc. (NYSE:SPB), TCF Financial Corporation (NYSE:TCF), Amedisys Inc (NASDAQ:AMED), and iShares MSCI All Country Asia ex Jpn ETF (NASDAQ:AAXJ). This group of stocks’ market valuations are closest to KL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPB | 26 | 915142 | 4 |
| TCF | 24 | 308162 | 9 |
| AMED | 20 | 140171 | 5 |
| AAXJ | 1 | 1786 | -2 |
| Average | 17.75 | 341315 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $171 million in KL’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand iShares MSCI All Country Asia ex Jpn ETF (NASDAQ:AAXJ) is the least popular one with only 1 bullish hedge fund positions. Kirkland Lake Gold Ltd. (NYSE:KL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SPB might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.