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Golden Star Resources Ltd. (GSS): Hedge Funds Are Buying, But Still Bearish

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Golden Star Resources Ltd. (NYSE:GSS).

Golden Star Resources Ltd. (NYSE:GSS) was in 6 hedge funds’ portfolios at the end of June. GSS shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. There were 3 hedge funds in our database with GSS positions at the end of the previous quarter. Our calculations also showed that GSS isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most traders, hedge funds are assumed to be underperforming, old financial vehicles of the past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the aristocrats of this club, about 750 funds. These investment experts direct bulk of the smart money’s total asset base, and by watching their top equity investments, Insider Monkey has uncovered a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

GSS_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the latest hedge fund action encompassing Golden Star Resources Ltd. (NYSE:GSS).

How have hedgies been trading Golden Star Resources Ltd. (NYSE:GSS)?

Heading into the third quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in GSS over the last 16 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Paul Marshall Marshall Wace

The largest stake in Golden Star Resources Ltd. (NYSE:GSS) was held by Renaissance Technologies, which reported holding $10.8 million worth of stock at the end of March. It was followed by Marshall Wace LLP with a $0.4 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Citadel Investment Group.

As industrywide interest jumped, specific money managers have jumped into Golden Star Resources Ltd. (NYSEAMEX:GSS) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the biggest position in Golden Star Resources Ltd. (NYSE:GSS). Marshall Wace LLP had $0.4 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $0.3 million position during the quarter. The only other fund with a brand new GSS position is Israel Englander’s Millennium Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Golden Star Resources Ltd. (NYSE:GSS) but similarly valued. These stocks are Intrepid Potash, Inc. (NYSE:IPI), Natural Resource Partners LP (NYSE:NRP), CAI International Inc (NYSE:CAI), and REX American Resources Corp (NYSE:REX). This group of stocks’ market values resemble GSS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IPI 16 30362 2
NRP 6 24394 1
CAI 14 115243 -2
REX 8 40085 2
Average 11 52521 0.75

View table here if you experience formatting issues.

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 $53 million. That figure was $12 million in GSS’s case. Intrepid Potash, Inc. (NYSE:IPI) is the most popular stock in this table. On the other hand Natural Resource Partners LP (NYSE:NRP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Golden Star Resources Ltd. (NYSE:GSS) is even less popular than NRP. Hedge funds dodged a bullet by taking a bearish stance towards GSS. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GSS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GSS investors were disappointed as the stock returned -29% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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