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Hedge Funds Are Dumping McEwen Mining Inc (MUX)

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

Is McEwen Mining Inc (NYSE:MUX) a healthy stock for your portfolio? Money managers are taking a bearish view. The number of long hedge fund bets fell by 1 recently. Our calculations also showed that MUX 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MUX_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 take a look at the key hedge fund action regarding McEwen Mining Inc (NYSE:MUX).

How are hedge funds trading McEwen Mining Inc (NYSE:MUX)?

At the end of the second quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in MUX over the last 16 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.

Ken Griffin

Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in McEwen Mining Inc (NYSE:MUX). Citadel Investment Group has a $1.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Vertex One Asset Management, led by John Thiessen, holding a $0.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of Ken Griffin’s Citadel Investment Group, David Harding’s Winton Capital Management and Murray Stahl’s Horizon Asset Management.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified MUX as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks similar to McEwen Mining Inc (NYSE:MUX). These stocks are Jianpu Technology Inc. (NYSE:JT), China Yuchai International Limited (NYSE:CYD), Newpark Resources Inc (NYSE:NR), and Party City Holdco Inc (NYSE:PRTY). This group of stocks’ market caps are similar to MUX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JT 4 34758 -3
CYD 9 67669 0
NR 8 26342 -7
PRTY 10 57958 -9
Average 7.75 46682 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $2 million in MUX’s case. Party City Holdco Inc (NYSE:PRTY) is the most popular stock in this table. On the other hand Jianpu Technology Inc. (NYSE:JT) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks McEwen Mining Inc (NYSE:MUX) is even less popular than JT. Hedge funds dodged a bullet by taking a bearish stance towards MUX. 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 MUX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MUX investors were disappointed as the stock returned -10.9% 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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