You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Klondex Mines Ltd (NYSE:KLDX) was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. KLDX investors should pay attention to an increase in enthusiasm from smart money recently. There were 7 hedge funds in our database with KLDX holdings at the end of the previous quarter. At the end of this article we will also compare KLDX to other stocks including Teladoc Inc (NYSE:TDOC), Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB), and Energy Recovery, Inc. (NASDAQ:ERII) 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 does the smart money think about Klondex Mines Ltd (NYSE:KLDX)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KLDX over the last 5 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Sprott Asset Management, led by Eric Sprott, holds the most valuable position in Klondex Mines Ltd (NYSE:KLDX). Sprott Asset Management has a $22.7 million position in the stock. Sitting at the No. 2 spot is Sun Valley Gold, led by Peter Franklin Palmedo, holding a $14.1 million position. Some other peers that are bullish include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies, one of the largest hedge funds in the world. We should note that two of these hedge funds (Sprott Asset Management and Sun Valley Gold) are 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.
Now, specific money managers have been driving this bullishness. BlueCrest Capital Mgmt., led by Michael Platt and William Reeves, assembled the largest position in Klondex Mines Ltd (NYSE:KLDX). BlueCrest Capital Mgmt. had $0.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.3 million position during the quarter. The following funds were also among the new KLDX investors: Peter Muller’s PDT Partners and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Klondex Mines Ltd (NYSE:KLDX) but similarly valued. We will take a look at Teladoc Inc (NYSE:TDOC), Meridian Interstate Bancorp, Inc. (NASDAQ:EBSB), Energy Recovery, Inc. (NASDAQ:ERII), and Raven Industries, Inc. (NASDAQ:RAVN). This group of stocks’ market valuations are closest to KLDX’s market valuation.
|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 12 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $43 million in KLDX’s case. Energy Recovery, Inc. (NASDAQ:ERII) is the most popular stock in this table. On the other hand Teladoc Inc (NYSE:TDOC) is the least popular one with only 6 bullish hedge fund positions. Klondex Mines Ltd (NYSE:KLDX) 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 ERII might be a better candidate to consider taking a long position in.