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Here is What Hedge Funds Think About AngloGold Ashanti Limited (AU)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards AngloGold Ashanti Limited (NYSE:AU).

Is AngloGold Ashanti Limited (NYSE:AU) the right pick for your portfolio? The smart money is getting more bullish. The number of long hedge fund positions improved by 11 lately. Our calculations also showed that au isn’t among the 30 most popular stocks among hedge funds. AU was in 23 hedge funds’ portfolios at the end of the first quarter of 2019. There were 12 hedge funds in our database with AU holdings at the end of the previous quarter.

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.

PAULSON & CO

Let’s check out the latest hedge fund action regarding AngloGold Ashanti Limited (NYSE:AU).

What does the smart money think about AngloGold Ashanti Limited (NYSE:AU)?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 92% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AU over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AU Positions

Among these funds, Paulson & Co held the most valuable stake in AngloGold Ashanti Limited (NYSE:AU), which was worth $167.4 million at the end of the first quarter. On the second spot was Arrowstreet Capital which amassed $48.3 million worth of shares. Moreover, Oaktree Capital Management, Renaissance Technologies, and Millennium Management were also bullish on AngloGold Ashanti Limited (NYSE:AU), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most valuable position in AngloGold Ashanti Limited (NYSE:AU). Millennium Management had $18.7 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $4.4 million position during the quarter. The following funds were also among the new AU investors: Louis Bacon’s Moore Global Investments, Dmitry Balyasny’s Balyasny Asset Management, and Noam Gottesman’s GLG Partners.

Let’s go over hedge fund activity in other stocks similar to AngloGold Ashanti Limited (NYSE:AU). We will take a look at Watsco Inc (NYSE:WSO), Syneos Health, Inc. (NASDAQ:SYNH), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), and Morningstar, Inc. (NASDAQ:MORN). This group of stocks’ market caps are similar to AU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WSO 18 137568 4
SYNH 26 333112 2
OLLI 22 155022 -2
MORN 21 225704 1
Average 21.75 212852 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $357 million in AU’s case. Syneos Health, Inc. (NASDAQ:SYNH) is the most popular stock in this table. On the other hand Watsco Inc (NYSE:WSO) is the least popular one with only 18 bullish hedge fund positions. AngloGold Ashanti Limited (NYSE:AU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AU wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AU were disappointed as the stock returned -5.4% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

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