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Five Hedge Funds’ Picks that Show Strong Gains

If there is one topic that has been continuously discussed in business news since the beginning of this year, it has to be the underperformance of the hedge fund industry due to weak returns generated by the stock market and huge drops registered by stocks like Sunedison and Valeant. Almost every day there are articles on how the most prominent names in the industry have suffered large drawdowns  or  how some hedge funds lost a ton of money by betting on stocks that have plummeted heavily. However, at the same time, there are stocks that hedge funds collectively liked that have delivered decent returns. In this post, we will be focusing on five stocks held by a large number of hedge funds among the over 800 hedge funds covered by us that gained over 20% during the first three months of 2015. The stocks that have made it to our list had at least 40 hedge funds betting on them at the end of 2015.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 Barrick Gold Corporation (USA) (NYSE:ABX)

– Investors with Long Positions (as of December 31): 40

– Aggregate Value of Investors’ Holdings (as of December 31): $1.15 billion

The ownership of Barrick Gold Corporation (USA) (NYSE:ABX) among funds covered by us remained constant, but the aggregate value of their holdings increased by $218 million during the fourth quarter. Billionaire Jim Simons‘ Renaissance Technologies was one of the hedge funds that increased its stake in the company by 40% to 25.71 million shares. Though most gold mining stocks have appreciated significantly this year, Barrick Gold Corporation (USA) (NYSE:ABX) has turned out to be one of the best performers even within the sector. Shares of the company ended the first quarter with gains of 84% and currently trade up over 105% year-to-date. On April 8, Credit Suisse analyst Anita Soni upgraded the stock to ‘Outperform’ from ‘Neutral’ and raised the price target to $17 from $11. In her note, Ms. Soni stated that the company’s commitment to a 15% return on invested capital  “positions ABX to effectively capture the leverage through prudent deployment of cash flow that would accrue during a period of higher gold prices”.

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