After a lengthy stretch of outperformance, small-cap stocks suffered from July 2015 through June 2016, as heightened global economic fears led investors to flee to the safe havens of large-cap stocks and other instruments. Those stocks outperformed small-caps by about 10 percentage points during that time, with small-cap healthcare stocks being particularly hard hit. However, the tide has since turned in a big way, as evidenced by small-caps toppling their large-cap peers by 5 percentage points in the third quarter, and by another 5 percentage points in the first seven weeks of the fourth quarter. In this article, we’ll analyze how this shift affected hedge funds’ Q3 trading of AngloGold Ashanti Limited (ADR) (NYSE:AU) and see how the stock is affected by the recent hedge fund activity.
Is AngloGold Ashanti Limited (ADR) (NYSE:AU) a great stock to buy now? The smart money is actually taking a pessimistic view. The number of bullish hedge fund positions went down by 6 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Helmerich & Payne, Inc. (NYSE:HP), Antero Resources Corp (NYSE:AR), and Comerica Incorporated (NYSE:CMA) to gather more data points.
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What does the smart money think about AngloGold Ashanti Limited (ADR) (NYSE:AU)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 22% from the second quarter of 2016. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Paulson & Co, managed by John Paulson, holds the largest position in AngloGold Ashanti Limited (ADR) (NYSE:AU). Paulson & Co has a $203.5 million position in the stock, comprising 2.2% of its 13F portfolio. The second most bullish fund manager is Cliff Asness of AQR Capital Management, with a $67.2 million position. Other members of the smart money with similar optimism include Jim Simons’ Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Burbank’s Passport Capital.
Due to the fact that AngloGold Ashanti Limited (ADR) (NYSE:AU) has faced bearish sentiment from the smart money, we can see that there exists a select few fund managers that decided to sell off their entire stakes in the third quarter. Intriguingly, First Eagle Investment Management dropped the largest position of the 700 funds tracked by Insider Monkey, comprising close to $36.5 million in stock. Jacob Gottlieb’s now-closed fund, Visium Asset Management, also dumped its holdings, about $8.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 6 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AngloGold Ashanti Limited (ADR) (NYSE:AU) but similarly valued. These stocks are Helmerich & Payne, Inc. (NYSE:HP), Antero Resources Corp (NYSE:AR), Comerica Incorporated (NYSE:CMA), and Splunk Inc (NASDAQ:SPLK). This group of stocks’ market valuations resemble AU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HP | 25 | 287195 | 1 |
| AR | 40 | 1577120 | -11 |
| CMA | 41 | 851631 | -1 |
| SPLK | 32 | 595827 | 0 |
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $828 million. That figure was $520 million in AU’s case. Comerica Incorporated (NYSE:CMA) is the most popular stock in this table. On the other hand Helmerich & Payne, Inc. (NYSE:HP) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks AngloGold Ashanti Limited (ADR) (NYSE:AU) is even less popular than HP. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. We believe higher interest rates will reduce the appetite for gold over the next 2-4 years and gold prices may even see sub-$1000 levels. Hedge funds may have similar views as they have been cutting back their gold related bets.
Disclosure: None
