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Golden Star Resources Ltd. (USA) (GSS): Hedge Funds Are Snapping Up

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Golden Star Resources Ltd. (USA) (NYSEMKT:GSS) , and what that likely means for the prospects of the company and its stock.

Golden Star Resources Ltd. (USA) (NYSEMKT:GSS) has seen an increase in support from the world’s most successful money managers lately. There were 4 hedge funds in our database with GSS positions at the end of the previous quarter. There were 9 bullish funds at the end of Q3. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as San Juan Basin Royalty Trust (NYSE:SJT), Oil-Dri Corporation of America (NYSE:ODC), and Mitek Systems, Inc. (NASDAQ:MITK) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to take a gander at the fresh action surrounding Golden Star Resources Ltd. (USA) (NYSEAMEX:GSS).

Hedge fund activity in Golden Star Resources Ltd. (USA) (NYSEMKT:GSS)

At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 125% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GSS over the last 5 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

HedgeFundSentimentChart

According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in Golden Star Resources Ltd. (USA) (NYSEMKT:GSS). Renaissance Technologies has a $9.2 million position in the stock. Remaining members of the smart money that hold long positions inlude Ken Griffin’s Citadel Investment Group and Solomon Kumin’s Folger Hill Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, specific money managers were breaking ground themselves. Alden Global Capital established the most outsized position in Golden Star Resources Ltd. (USA) (NYSEMKT:GSS). Alden Global Capital had $2.1 million invested in the company at the end of the quarter. GLG Partners also initiated a $1.1 million position during the quarter. The other funds with brand new GSS positions are Folger Hill Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt..

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Golden Star Resources Ltd. (USA) (NYSEMKT:GSS) but similarly valued. These stocks are San Juan Basin Royalty Trust (NYSE:SJT), Oil-Dri Corporation of America (NYSE:ODC), Mitek Systems, Inc. (NASDAQ:MITK), and AxoGen, Inc. (NASDAQ:AXGN). This group of stocks’ market valuations resemble GSS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SJT 6 9223 -1
ODC 5 43673 0
MITK 17 31319 -1
AXGN 11 40283 4

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $14 million in GSS’s case. Mitek Systems, Inc. (NASDAQ:MITK) is the most popular stock in this table. On the other hand Oil-Dri Corporation of America (NYSE:ODC) is the least popular one with only 5 bullish hedge fund positions. Golden Star Resources Ltd. (USA) (NYSEMKT:GSS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MITK might be a better candidate to consider taking a long position in.

Disclosure: None

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