Hedge Funds Have Never Been This Bullish On Pan American Silver Corp. (PAAS)

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Pan American Silver Corp. (NASDAQ:PAAS) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Pan American Silver Corp. (NASDAQ:PAAS) ready to rally soon? The smart money is taking an optimistic view. The number of bullish hedge fund positions inched up by 5 lately. Our calculations also showed that PAAS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PAAS was in 22 hedge funds’ portfolios at the end of the third quarter of 2019. There were 17 hedge funds in our database with PAAS positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are tons of indicators shareholders put to use to appraise their holdings. Two of the most useful indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outperform their index-focused peers by a solid amount (see the details here).

Richard Driehaus of Driehaus Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the latest hedge fund action surrounding Pan American Silver Corp. (NASDAQ:PAAS).

How are hedge funds trading Pan American Silver Corp. (NASDAQ:PAAS)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the second quarter of 2019. On the other hand, there were a total of 15 hedge funds with a bullish position in PAAS a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the most valuable position in Pan American Silver Corp. (NASDAQ:PAAS). Renaissance Technologies has a $124.2 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is David Greenspan of Slate Path Capital, with a $56.4 million position; 3.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions contain Israel Englander’s Millennium Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Eric Sprott’s Sprott Asset Management. In terms of the portfolio weights assigned to each position Sloane Robinson Investment Management allocated the biggest weight to Pan American Silver Corp. (NASDAQ:PAAS), around 7.64% of its 13F portfolio. Greywolf Capital Management is also relatively very bullish on the stock, setting aside 6.64 percent of its 13F equity portfolio to PAAS.

As aggregate interest increased, specific money managers were breaking ground themselves. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the most outsized position in Pan American Silver Corp. (NASDAQ:PAAS). Polar Capital had $21.8 million invested in the company at the end of the quarter. Hugh Sloane’s Sloane Robinson Investment Management also initiated a $16.9 million position during the quarter. The following funds were also among the new PAAS investors: Michael Gelband’s ExodusPoint Capital, Richard Driehaus’s Driehaus Capital, and Charles Davidson and Joseph Jacobs’s Wexford Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pan American Silver Corp. (NASDAQ:PAAS) but similarly valued. We will take a look at Federated Investors Inc (NYSE:FII), KAR Auction Services Inc (NYSE:KAR), B2Gold Corp (NYSEMKT:BTG), and United States Cellular Corporation (NYSE:USM). All of these stocks’ market caps are closest to PAAS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FII 23 213204 1
KAR 30 574775 -2
BTG 14 186035 -3
USM 18 139096 3
Average 21.25 278278 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $329 million in PAAS’s case. KAR Auction Services Inc (NYSE:KAR) is the most popular stock in this table. On the other hand B2Gold Corp (NYSEMKT:BTG) is the least popular one with only 14 bullish hedge fund positions. Pan American Silver Corp. (NASDAQ:PAAS) 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 PAAS as the stock returned 23% 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.