Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: McEwen Mining Inc (NYSE:MUX).
Is McEwen Mining Inc (NYSE:MUX) going to take off soon? Prominent investors are actually getting less optimistic. The number of long hedge fund bets went down by 2 recently. MUX was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 10 hedge funds in our database with MUX holdings at the end of the previous quarter. At the end of this article we will also compare MUX to other stocks including NuStar GP Holdings, LLC (NYSE:NSH), Comfort Systems USA, Inc. (NYSE:FIX), and Sturm, Ruger & Company (NYSE:RGR) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
What have hedge funds been doing with McEwen Mining Inc (NYSE:MUX)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, down by 20% from the second quarter of 2016. On the other hand, there were a total of 8 hedge funds with a bullish position in MUX at the beginning of 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.
When looking at the institutional investors followed by Insider Monkey, John Thiessen’s Vertex One Asset Management has the most valuable position in McEwen Mining Inc (NYSE:MUX), worth close to $6.2 million, amounting to 1% of its total 13F portfolio. On Vertex One Asset Management’s heels is D E Shaw, one of the biggest hedge funds in the world, which holds a $5.1 million position. Other peers that are bullish encompass Eric Sprott’s Sprott Asset Management, Chuck Royce’s Royce & Associates and Murray Stahl’s Horizon Asset Management. We should note that Sprott Asset Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that McEwen Mining Inc (NYSE:MUX) has weathered a decline in interest from the smart money, we can see that there lies a certain “tier” of funds that decided to sell off their positions entirely in the third quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cashed in the largest investment of the “upper crust” of funds studied by Insider Monkey, comprising about $2.4 million in stock. Michael A. Price and Amos Meron’s fund, Empyrean Capital Partners, also dropped its stock, about $2.1 million worth.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as McEwen Mining Inc (NYSE:MUX) but similarly valued. We will take a look at NuStar GP Holdings, LLC (NYSE:NSH), Comfort Systems USA, Inc. (NYSE:FIX), Sturm, Ruger & Company (NYSE:RGR), and Eagle Pharmaceuticals Inc (NASDAQ:EGRX). This group of stocks’ market caps are closest to MUX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $17 million in MUX’s case. Comfort Systems USA, Inc. (NYSE:FIX) is the most popular stock in this table. On the other hand NuStar GP Holdings, LLC (NYSE:NSH) is the least popular one with only 4 bullish hedge fund positions. McEwen Mining Inc (NYSE:MUX) 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. In this regard FIX might be a better candidate to consider taking a long position in.