We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Pretium Resources Inc (NYSE:PVG).
Pretium Resources Inc (NYSE:PVG) investors should pay attention to an increase in hedge fund sentiment of late. PVG was in 22 hedge funds’ portfolios at the end of the second quarter of 2019. There were 21 hedge funds in our database with PVG positions at the end of the previous quarter. Our calculations also showed that PVG isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to 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 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 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 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.
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 review the key hedge fund action encompassing Pretium Resources Inc (NYSE:PVG).
Hedge fund activity in Pretium Resources Inc (NYSE:PVG)
Heading into the third quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in PVG a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Polar Capital held the most valuable stake in Pretium Resources Inc (NYSE:PVG), which was worth $19.4 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $17.5 million worth of shares. Moreover, Bridger Management, Anchor Bolt Capital, and Sprott Asset Management were also bullish on Pretium Resources Inc (NYSE:PVG), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key money managers have jumped into Pretium Resources Inc (NYSE:PVG) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the biggest call position in Pretium Resources Inc (NYSE:PVG). PEAK6 Capital Management had $10.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.5 million investment in the stock during the quarter. The other funds with brand new PVG positions are Renaissance Technologies, George Zweig, Shane Haas and Ravi Chander’s Signition LP, and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks similar to Pretium Resources Inc (NYSE:PVG). We will take a look at The Bank of N.T. Butterfield & Son Limited (NYSE:NTB), Fabrinet (NYSE:FN), Varonis Systems Inc (NASDAQ:VRNS), and Minerals Technologies Inc (NYSE:MTX). This group of stocks’ market values match PVG’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $94 million in PVG’s case. Fabrinet (NYSE:FN) is the most popular stock in this table. On the other hand The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) is the least popular one with only 13 bullish hedge fund positions. Pretium Resources Inc (NYSE:PVG) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on PVG as the stock returned 15% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.