Is Vale SA (VALE) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Vale SA (NYSE:VALE) based on that data.

Vale SA (NYSE:VALE) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. Vale SA (NYSE:VALE) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 36. There were 35 hedge funds in our database with VALE positions at the end of the fourth quarter. Our calculations also showed that VALE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In today’s marketplace there are many gauges stock traders use to assess publicly traded companies. Some of the most underrated gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best fund managers can beat the S&P 500 by a superb amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s analyze the key hedge fund action surrounding Vale SA (NYSE:VALE).

Do Hedge Funds Think VALE Is A Good Stock To Buy Now?

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VALE over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

The largest stake in Vale SA (NYSE:VALE) was held by Fisher Asset Management, which reported holding $661.7 million worth of stock at the end of December. It was followed by GQG Partners with a $639.3 million position. Other investors bullish on the company included Arrowstreet Capital, Crake Asset Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Vale SA (NYSE:VALE), around 30.21% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, setting aside 5.81 percent of its 13F equity portfolio to VALE.

Judging by the fact that Vale SA (NYSE:VALE) has experienced a decline in interest from the smart money, we can see that there exists a select few money managers that elected to cut their entire stakes in the first quarter. Interestingly, Howard Marks’s Oaktree Capital Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth close to $113.2 million in stock. William B. Gray’s fund, Orbis Investment Management, also dumped its stock, about $57.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Vale SA (NYSE:VALE). We will take a look at British American Tobacco plc (NYSE:BTI), Anthem Inc (NYSE:ANTM), Intuitive Surgical, Inc. (NASDAQ:ISRG), Fidelity National Information Services Inc. (NYSE:FIS), Lam Research Corporation (NASDAQ:LRCX), S&P Global Inc. (NYSE:SPGI), and Coupang, Inc. (NYSE:CPNG). All of these stocks’ market caps are closest to VALE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BTI 14 1034777 4
ANTM 58 5373054 -12
ISRG 53 2326096 4
FIS 74 8251021 -14
LRCX 54 3164975 -2
SPGI 66 6245296 -9
CPNG 40 21669289 40
Average 51.3 6866358 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.3 hedge funds with bullish positions and the average amount invested in these stocks was $6866 million. That figure was $2616 million in VALE’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 14 bullish hedge fund positions. Vale SA (NYSE:VALE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VALE is 41. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. A small number of hedge funds were also right about betting on VALE as the stock returned 31.9% since the end of the first quarter (through 7/2) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.