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Hedge Funds Nibbling On Vale SA (VALE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Vale SA (NYSE:VALE).

Vale SA (NYSE:VALE) investors should be aware of an increase in hedge fund interest in recent months. Our calculations also showed that VALE isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the fresh hedge fund action encompassing Vale SA (NYSE:VALE).

How have hedgies been trading Vale SA (NYSE:VALE)?

Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VALE over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

More specifically, Orbis Investment Management was the largest shareholder of Vale SA (NYSE:VALE), with a stake worth $279.2 million reported as of the end of September. Trailing Orbis Investment Management was Fisher Asset Management, which amassed a stake valued at $226.2 million. Renaissance Technologies, Citadel Investment Group, and Contrarian Capital 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 Contrarian Capital allocated the biggest weight to Vale SA (NYSE:VALE), around 34.06% of its 13F portfolio. JHL Capital Group is also relatively very bullish on the stock, dishing out 31.88 percent of its 13F equity portfolio to VALE.

Now, key hedge funds have jumped into Vale SA (NYSE:VALE) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the biggest position in Vale SA (NYSE:VALE). Arrowstreet Capital had $44.3 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $25.9 million investment in the stock during the quarter. The following funds were also among the new VALE investors: Martin Taylor’s Crake Asset Management, David Kowitz and Sheldon Kasowitz’s Indus Capital, and David Halpert’s Prince Street Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Vale SA (NYSE:VALE) but similarly valued. We will take a look at The Sherwin-Williams Company (NYSE:SHW), Applied Materials, Inc. (NASDAQ:AMAT), Pinduoduo Inc. (NASDAQ:PDD), and TC Energy Corporation (NYSE:TRP). This group of stocks’ market values match VALE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHW 57 1511243 2
AMAT 56 2317608 -16
PDD 28 1671925 -4
TRP 24 182598 2
Average 41.25 1420844 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.25 hedge funds with bullish positions and the average amount invested in these stocks was $1421 million. That figure was $1112 million in VALE’s case. The Sherwin-Williams Company (NYSE:SHW) is the most popular stock in this table. On the other hand TC Energy Corporation (NYSE:TRP) is the least popular one with only 24 bullish hedge fund positions. Vale SA (NYSE:VALE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately VALE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VALE investors were disappointed as the stock returned 17.7% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.