Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The one and a half month time period since the end of the third quarter is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Kinross Gold Corporation (NYSE:KGC).
Kinross Gold Corporation (NYSE:KGC) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. KGC was in 18 hedge funds’ portfolios at the end of the third quarter of 2018. There were 21 hedge funds in our database with KGC holdings at the end of the previous quarter. Our calculations also showed that KGC isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a look at the recent hedge fund action regarding Kinross Gold Corporation (NYSE:KGC).
How are hedge funds trading Kinross Gold Corporation (NYSE:KGC)?
Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in KGC heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Kinross Gold Corporation (NYSE:KGC), which was worth $150 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $65.2 million worth of shares. Moreover, Kopernik Global Investors, Odey Asset Management Group, and Two Sigma Advisors were also bullish on Kinross Gold Corporation (NYSE:KGC), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Kinross Gold Corporation (NYSE:KGC) has faced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few funds that decided to sell off their full holdings last quarter. Intriguingly, Noam Gottesman’s GLG Partners sold off the largest investment of all the hedgies watched by Insider Monkey, worth close to $1.5 million in stock, and Joel Greenblatt’s Gotham Asset Management was right behind this move, as the fund sold off about $0.2 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kinross Gold Corporation (NYSE:KGC) but similarly valued. We will take a look at MorphoSys AG (NASDAQ:MOR), Apergy Corporation (NYSE:APY), Cathay General Bancorp (NASDAQ:CATY), and Copa Holdings, S.A. (NYSE:CPA). This group of stocks’ market values are similar to KGC’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 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $267 million in KGC’s case. Apergy Corporation (NYSE:APY) is the most popular stock in this table. On the other hand MorphoSys AG (NASDAQ:MOR) is the least popular one with only 5 bullish hedge fund positions. Kinross Gold Corporation (NYSE:KGC) 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. In this regard APY might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.