Hedge Funds Are Getting Into Mining These Five Mining Stocks

Some investors think commodities can’t do well if the Chinese economy remains stuck in neutral. Others don’t think gold can do well if the Federal Reserve raises rates and inflation remains under control. While those viewpoints have some compelling logic behind them, there are also plenty of elite fund managers who feel the opposite – that gold can rally in the near term and that commodities have further upside left. In this article, we use 13-F filings to analyze the elite fund universe’s favorite mining stocks such as Barrick Gold Corporation (USA) (NYSE:ABX), Newmont Mining Corp (NYSE:NEM), Freeport-McMoRan Inc (NYSE:FCX), Goldcorp Inc. (USA) (NYSE:GG), and Silver Wheaton Corp. (USA) (NYSE:SLW) and take a closer look at each stock.

While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

#5 Silver Wheaton Corp. (USA) (NYSE:SLW)

– Number of Hedge Fund Holders (as of March 31): 33
– Total Value of Hedge Fund Holdings (as of March 31): $401.97 million
– Hedge Fund Holdings as Percent of Float (as of March 31): 6.00%

With 33 elite fund holders as of March 31, Silver Wheaton Corp. (USA) (NYSE:SLW) is the fifth most widely held mining stock among elite funds. Analysts at BMO Capital are bullish on the stock, assigning the Silver Wheaton an ‘Outperform’ rating with a price target of $24 per share. The analysts think gold could rise to $1400 and silver could rally to $22.50 over the intermediate term. If that happens, Silver Wheaton’s cash flow will jump, supporting the stock’s 47% year-to-date. Cliff Asness’ AQR Capital Management owned more than 2.1 million shares at the end of the first quarter.

#4 Goldcorp Inc. (USA) (NYSE:GG)

– Number of Hedge Fund Holders (as of March 31): 33
– Total Value of Hedge Fund Holdings (as of March 31): $1.03 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 7.60%

The big gets bigger. In May, Goldcorp Inc. (USA) (NYSE:GG) agreed to acquire Kaminak Gold for around CAD 520 million ($406 million). Kaminak has serious potential, with approximately 3 million ounces of indicated gold resources and 2.2 million ounces in inferred resources at its Coffee project. It’s low-cost too. Analysts estimate that Coffee could potentially produce more than 200,000 oz of gold per year with an all-in sustaining cost of around $550 per ounce. Jim Simons’ Renaissance Technologies raised its stake by 62% during the first quarter to over 3.5 million shares held at the end of March.

#3 Freeport-McMoRan Inc (NYSE:FCX)

– Number of Hedge Fund Holders (as of March 31): 34
– Total Value of Hedge Fund Holdings (as of March 31): $1.59 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 12.30%

The number of funds from our database long the stock fell by three quarter-over-quarter to 34 at the end of March, while Freeport-McMoRan Inc (NYSE:FCX)’s shares have surged over 60% year-to-date. Given how beaten-up the stock was at the end of 2015, and the 80% surge in crude prices since February, it’s not surprising that Freeport-McMoRan Inc (NYSE:FCX) shares would do well. The company has lately been selling some of its assets to deleverage and is rumored to be considering selling a 20% stake of its assets in North and South America for as much as $2 billion. If copper and oil rallies and Freeport-McMoRan gets more than-expected from its asset sales, look for the stock to continue to do well.

#2 Newmont Mining Corp (NYSE:NEM)

– Number of Hedge Fund Holders (as of March 31): 37
– Total Value of Hedge Fund Holdings (as of March 31): $896.85 million
– Hedge Fund Holdings as Percent of Float (as of March 31): 6.40%

Newmont Mining Corp (NYSE:NEM) reported first quarter earnings of $0.34 per share on sales of $2 billion, beating estimates by $0.14 and $130 million, respectively. Results were better-than-expected because management did a good job holding down costs and increasing production. The company’s all-in sustaining costs for gold for the first quarter were $828 per ounce versus $849 per ounce in the same quarter of last year. Analysts at Goldman Sachs see more upside ahead and earlier this month they upgraded the stock to ‘Buy’ from ‘Neutral’ and increased the price target to $36 from $23.30.

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

– Number of Hedge Fund Holders (as of March 31): 49
– Total Value of Hedge Fund Holdings (as of March 31): $2.73 billion
– Hedge Fund Holdings as Percent of Float (as of March 31): 17.30%

With 49 elite funds holding shares at the end of March, Barrick Gold Corporation (USA) (NYSE:ABX) is the most popular mining stock among the smart money crowd. Among the most bullish of the elite investors long the stock is George Soros‘ Soros Fund Management, which added a new stake of 19.4 million shares in Barrick in the first quarter, which represented 5.82% of the fund’s equity portfolio. George Soros is famous for his macro-economic calls and successfully played the previous gold bubble from 2008 to 2011. With his entry into Barrick, it seems Soros Fund Management is either bullish again, or hedging in case of a future economic meltdown in China or elsewhere.

Disclosure: none