After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards MAG Silver Corporation (NYSE:MAG).
Is MAG a good stock to buy now? MAG Silver Corporation (NYSE:MAG) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of September. Our calculations also showed that MAG 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). At the end of this article we will also compare MAG to other stocks including Ligand Pharmaceuticals Inc. (NASDAQ:LGND), CorVel Corporation (NASDAQ:CRVL), and GCP Applied Technologies Inc. (NYSE:GCP) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind let’s review the latest hedge fund action surrounding MAG Silver Corporation (NYSE:MAG).
Do Hedge Funds Think MAG Is A Good Stock To Buy Now?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in MAG a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Sprott Asset Management was the largest shareholder of MAG Silver Corporation (NYSE:MAG), with a stake worth $210.7 million reported as of the end of September. Trailing Sprott Asset Management was Royce & Associates, which amassed a stake valued at $5.7 million. Citadel Investment Group, Waratah Capital Advisors, and PEAK6 Capital Management 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 Sprott Asset Management allocated the biggest weight to MAG Silver Corporation (NYSE:MAG), around 8.63% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to MAG.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Knoll Capital Management).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as MAG Silver Corporation (NYSE:MAG) but similarly valued. We will take a look at Ligand Pharmaceuticals Inc. (NASDAQ:LGND), CorVel Corporation (NASDAQ:CRVL), GCP Applied Technologies Inc. (NYSE:GCP), Cytokinetics, Inc. (NASDAQ:CYTK), Maxar Technologies Inc (NYSE:MAXR), Skyline Champion Corporation (NYSE:SKY), and Edgewell Personal Care Company (NYSE:EPC). This group of stocks’ market values are closest to MAG’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 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $228 million in MAG’s case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table. On the other hand CorVel Corporation (NASDAQ:CRVL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks MAG Silver Corporation (NYSE:MAG) is even less popular than CRVL. Our overall hedge fund sentiment score for MAG is 26.4. 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. Hedge funds dodged a bullet by taking a bearish stance towards MAG. Our calculations showed that the top 20 most popular hedge fund stocks 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 but managed to beat the market again by 16.2 percentage points. Unfortunately MAG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MAG investors were disappointed as the stock returned 3.5% since the end of the third quarter (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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.