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Hedge Funds Rushed Into Kinross Gold Corporation (KGC) A Bit Early

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Kinross Gold Corporation (NYSE:KGC).

Kinross Gold Corporation (NYSE:KGC) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. KGC was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. There were 18 hedge funds in our database with KGC positions at the end of the previous quarter. Our calculations also showed that KGC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Crispin Odey of Odey Asset Management Group

Crispin Odey of Odey Asset Management Group

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 peek at the key hedge fund action regarding Kinross Gold Corporation (NYSE:KGC).

What does smart money think about Kinross Gold Corporation (NYSE:KGC)?

At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 44% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in KGC over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds with KGC Positions

Among these funds, Renaissance Technologies held the most valuable stake in Kinross Gold Corporation (NYSE:KGC), which was worth $284.7 million at the end of the third quarter. On the second spot was Millennium Management which amassed $44 million worth of shares. Citadel Investment Group, Odey Asset Management Group, and Two Sigma Advisors 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 Sprott Asset Management allocated the biggest weight to Kinross Gold Corporation (NYSE:KGC), around 2.28% of its portfolio. Odey Asset Management Group is also relatively very bullish on the stock, dishing out 2.25 percent of its 13F equity portfolio to KGC.

As one would reasonably expect, key hedge funds have jumped into Kinross Gold Corporation (NYSE:KGC) headfirst. GLG Partners, managed by Noam Gottesman, assembled the largest position in Kinross Gold Corporation (NYSE:KGC). GLG Partners had $2.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $0.8 million investment in the stock during the quarter. The other funds with brand new KGC positions are Matthew Tewksbury’s Stevens Capital Management, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Mike Vranos’s Ellington.

Let’s check out hedge fund activity in other stocks similar to Kinross Gold Corporation (NYSE:KGC). These stocks are Toll Brothers Inc (NYSE:TOL), CACI International Inc (NYSE:CACI), Herbalife Nutrition Ltd. (NYSE:HLF), and SolarWinds Corporation (NYSE:SWI). This group of stocks’ market valuations resemble KGC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TOL 22 483101 2
CACI 25 522212 -4
HLF 22 2655964 -5
SWI 13 2504777 -9
Average 20.5 1541514 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $1542 million. That figure was $436 million in KGC’s case. CACI International Inc (NYSE:CACI) is the most popular stock in this table. On the other hand SolarWinds Corporation (NYSE:SWI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Kinross Gold Corporation (NYSE:KGC) is more popular among hedge funds. 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. Unfortunately KGC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KGC were disappointed as the stock returned -5.9% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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