We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Pretium Resources Inc (NYSE:PVG) and determine whether hedge funds skillfully traded this stock.
Pretium Resources Inc (NYSE:PVG) investors should be aware of a decrease in hedge fund interest lately. Pretium Resources Inc (NYSE:PVG) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 25. There were 25 hedge funds in our database with PVG holdings at the end of March. Our calculations also showed that PVG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s review the new hedge fund action surrounding Pretium Resources Inc (NYSE:PVG).
How are hedge funds trading Pretium Resources Inc (NYSE:PVG)?
Heading into the third quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in PVG a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Pretium Resources Inc (NYSE:PVG), with a stake worth $30.8 million reported as of the end of September. Trailing Arrowstreet Capital was Paulson & Co, which amassed a stake valued at $20.2 million. Citadel Investment Group, Bridger Management, and Sun Valley Gold 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 Sun Valley Gold allocated the biggest weight to Pretium Resources Inc (NYSE:PVG), around 2.14% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, earmarking 1.09 percent of its 13F equity portfolio to PVG.
Because Pretium Resources Inc (NYSE:PVG) has witnessed falling interest from the smart money, it’s easy to see that there were a few funds that decided to sell off their positions entirely heading into Q3. Interestingly, Brian Ashford-Russell and Tim Woolley’s Polar Capital dropped the biggest position of the 750 funds followed by Insider Monkey, worth close to $5.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $2.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds heading into Q3.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Pretium Resources Inc (NYSE:PVG) but similarly valued. These stocks are Texas Capital Bancshares Inc (NASDAQ:TCBI), Gibraltar Industries Inc (NASDAQ:ROCK), Trustmark Corp (NASDAQ:TRMK), MaxLinear, Inc. (NYSE:MXL), Vector Group Ltd (NYSE:VGR), Cactus, Inc. (NYSE:WHD), and WestAmerica Bancorp. (NASDAQ:WABC). This group of stocks’ market valuations are similar to PVG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $122 million in PVG’s case. Cactus, Inc. (NYSE:WHD) is the most popular stock in this table. On the other hand WestAmerica Bancorp. (NASDAQ:WABC) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Pretium Resources Inc (NYSE:PVG) is more popular among hedge funds. Our overall hedge fund sentiment score for PVG is 80.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 24.8% in 2020 through the end of September but still managed to beat the market by 19.3 percentage points. Hedge funds were also right about betting on PVG as the stock returned 52.9% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.