The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards DRDGOLD Ltd. (NYSE:DRD).
Is DRD a good stock to buy now? The best stock pickers were turning bullish. The number of bullish hedge fund bets went up by 7 in recent months. DRDGOLD Ltd. (NYSE:DRD) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 6. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that DRD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 2 hedge funds in our database with DRD holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a peek at the new hedge fund action encompassing DRDGOLD Ltd. (NYSE:DRD).
Do Hedge Funds Think DRD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 350% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DRD over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in DRDGOLD Ltd. (NYSE:DRD), which was worth $14.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $7.1 million worth of shares. Paloma Partners, AQR Capital Management, and Marshall Wace LLP 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 Paloma Partners allocated the biggest weight to DRDGOLD Ltd. (NYSE:DRD), around 0.11% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to DRD.
As aggregate interest increased, specific money managers were breaking ground themselves. Paloma Partners, managed by Donald Sussman, established the largest position in DRDGOLD Ltd. (NYSE:DRD). Paloma Partners had $4.2 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $2.2 million investment in the stock during the quarter. The following funds were also among the new DRD investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Richard Driehaus’s Driehaus Capital, and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as DRDGOLD Ltd. (NYSE:DRD) but similarly valued. We will take a look at Castle Biosciences, Inc. (NASDAQ:CSTL), Suburban Propane Partners LP (NYSE:SPH), DiamondRock Hospitality Company (NYSE:DRH), Translate Bio, Inc. (NASDAQ:TBIO), GenMark Diagnostics, Inc (NASDAQ:GNMK), The Buckle, Inc. (NYSE:BKE), and Re/Max Holdings Inc (NYSE:RMAX). This group of stocks’ market values are similar to DRD’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 16 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $32 million in DRD’s case. GenMark Diagnostics, Inc (NASDAQ:GNMK) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 3 bullish hedge fund positions. DRDGOLD Ltd. (NYSE:DRD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DRD is 53.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately DRD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); DRD investors were disappointed as the stock returned -6.6% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.