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Hedge Funds Are Crazy About First Majestic Silver Corp (AG)

Is First Majestic Silver Corp (NYSE:AG) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

First Majestic Silver Corp (NYSE:AG) has seen an increase in support from the world’s most elite money managers recently. AG was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with AG holdings at the end of the previous quarter. Our calculations also showed that AG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the fresh hedge fund action regarding First Majestic Silver Corp (NYSE:AG).

What have hedge funds been doing with First Majestic Silver Corp (NYSE:AG)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 56% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AG over the last 17 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of First Majestic Silver Corp (NYSE:AG), with a stake worth $13.4 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $7.7 million. Citadel Investment Group, Millennium Management, and Slate Path Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kamunting Street Capital allocated the biggest weight to First Majestic Silver Corp (NYSE:AG), around 0.26% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, dishing out 0.1 percent of its 13F equity portfolio to AG.

As industrywide interest jumped, some big names were breaking ground themselves. Renaissance Technologies, initiated the biggest position in First Majestic Silver Corp (NYSE:AG). Renaissance Technologies had $13.4 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $1.5 million position during the quarter. The other funds with new positions in the stock are Allan Teh’s Kamunting Street Capital, Paul Tudor Jones’s Tudor Investment Corp, and Noam Gottesman’s GLG Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as First Majestic Silver Corp (NYSE:AG) but similarly valued. These stocks are TransAlta Corporation (NYSE:TAC), Plexus Corp. (NASDAQ:PLXS), InVitae Corporation (NYSE:NVTA), and Premier Inc (NASDAQ:PINC). All of these stocks’ market caps are similar to AG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TAC 7 30962 -2
PLXS 8 58196 0
NVTA 13 325070 -3
PINC 17 166922 1
Average 11.25 145288 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $33 million in AG’s case. Premier Inc (NASDAQ:PINC) is the most popular stock in this table. On the other hand TransAlta Corporation (NYSE:TAC) is the least popular one with only 7 bullish hedge fund positions. First Majestic Silver Corp (NYSE:AG) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on AG as the stock returned 18.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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