Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Equinox Gold Corp. (NYSE:EQX) to find out whether there were any major changes in hedge funds’ views.
Is EQX a good stock to buy now? Equinox Gold Corp. (NYSE:EQX) investors should pay attention to an increase in enthusiasm from smart money of late. Equinox Gold Corp. (NYSE:EQX) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EQX 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
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. Keeping this in mind we’re going to check out the new hedge fund action encompassing Equinox Gold Corp. (NYSE:EQX).
Do Hedge Funds Think EQX Is A Good Stock To Buy Now?
At the end of September, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EQX over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Paulson & Co was the largest shareholder of Equinox Gold Corp. (NYSE:EQX), with a stake worth $29.3 million reported as of the end of September. Trailing Paulson & Co was Renaissance Technologies, which amassed a stake valued at $26.1 million. Sprott Asset Management, Two Sigma Advisors, and D E Shaw 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 Paulson & Co allocated the biggest weight to Equinox Gold Corp. (NYSE:EQX), around 0.91% of its 13F portfolio. Knoll Capital Management is also relatively very bullish on the stock, setting aside 0.44 percent of its 13F equity portfolio to EQX.
Now, specific money managers were breaking ground themselves. GLG Partners, managed by Noam Gottesman, initiated the largest position in Equinox Gold Corp. (NYSE:EQX). GLG Partners had $4.1 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also made a $1.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Fred Knoll’s Knoll Capital Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Equinox Gold Corp. (NYSE:EQX) but similarly valued. These stocks are Telecom Argentina S.A. (NYSE:TEO), PotlatchDeltic Corporation (NASDAQ:PCH), Lemonade, Inc. (NYSE:LMND), Hexcel Corporation (NYSE:HXL), Radian Group Inc (NYSE:RDN), Triton International Limited (NYSE:TRTN), and Select Medical Holdings Corporation (NYSE:SEM). This group of stocks’ market valuations match EQX’s market valuation.
|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 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $95 million in EQX’s case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 5 bullish hedge fund positions. Equinox Gold Corp. (NYSE:EQX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EQX is 53.7. 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 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately EQX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EQX investors were disappointed as the stock returned -15.8% since the end of September (through 12/14) 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.