While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Newmont Corporation (NYSE:NEM).
Is NEW a good stock to buy now? Hedge fund interest in Newmont Corporation (NYSE:NEM) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NEM 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 NEM to other stocks including Autodesk, Inc. (NASDAQ:ADSK), Dell Technologies Inc. (NYSE:DELL), and Kimberly Clark Corporation (NYSE:KMB) 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 leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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 let’s take a look at the recent hedge fund action encompassing Newmont Corporation (NYSE:NEM).
Hedge fund activity in Newmont Corporation (NYSE:NEM)
At Q3’s end, a total of 55 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 44 hedge funds with a bullish position in NEM a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Newmont Corporation (NYSE:NEM), which was worth $508.4 million at the end of the third quarter. On the second spot was GQG Partners which amassed $331.6 million worth of shares. AQR Capital Management, D E Shaw, and International Value Advisers 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 International Value Advisers allocated the biggest weight to Newmont Corporation (NYSE:NEM), around 12.59% of its 13F portfolio. Heathbridge Capital Management is also relatively very bullish on the stock, dishing out 11.06 percent of its 13F equity portfolio to NEM.
Since Newmont Corporation (NYSE:NEM) has witnessed falling interest from the smart money, it’s easy to see that there was a specific group of funds who sold off their full holdings heading into Q4. At the top of the heap, Andrew Weiss’s Weiss Asset Management cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $2.7 million in stock, and James Dondero’s Highland Capital Management was right behind this move, as the fund sold off about $2.5 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Newmont Corporation (NYSE:NEM). These stocks are Autodesk, Inc. (NASDAQ:ADSK), Dell Technologies Inc. (NYSE:DELL), Kimberly Clark Corporation (NYSE:KMB), The Bank of Nova Scotia (NYSE:BNS), Barrick Gold Corporation (NYSE:GOLD), Brookfield Asset Management Inc. (NYSE:BAM), and Edwards Lifesciences Corporation (NYSE:EW). All of these stocks’ market caps resemble NEM’s market cap.
|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 42.3 hedge funds with bullish positions and the average amount invested in these stocks was $1988 million. That figure was $1952 million in NEM’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 14 bullish hedge fund positions. Newmont Corporation (NYSE:NEM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NEM is 75.2. 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 positive signal but 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 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately NEM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NEM were disappointed as the stock returned -5.5% since the end of September (through 12/2) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.