Royce & Associates Drastically Reduces Stake in Pan American Silver Corp (PAAS)

Chuck Royce’s Royce & Associates significantly reduced its stake in Pan American Silver Corp (NASDAQ:PAAS) on Monday. According to a 13D filing, the investor now holds more than 4.8 million Common Shares, representing 3.2% of the company’s outstanding stock. After shedding 8,910,937 shares, which translates to a 64.7% decrease in its exposure, the investment firm seems eager to avoid further losses.

Royce & Associates has a long-standing history dating back to 1972, when it was founded by Chuck Royce. The fund favors a value-based approach, investing in companies with small market capitalization, which, according to its manager, constitute the core business of the firm. This small market-cap strategy has worked out quite well for Mr Royce and his funds, as demonstrated by its diversified equity portfolio, valued at around $29.6 billion. Thus, Pan American Silver Corp (NASDAQ:PAAS) stock fits the profile quite well, despite the fact that it seems to have more potential as a short sale, rather than a long-term value investment. In fact, the recent reduction in Royce & Associates’ exposure to the company comes at surprising moment, since shares are trading near their 52-week low. There seems to be a consensus amongst analysts and brokerages that the stock will rise throughout 2015. Nevertheless, the price target on the Pan American Silver shares was reduced by most firms, and the company reported lower earnings per share than expected in their last quarterly report.

Chuck Royce

Pan American Silver Corp (NASDAQ:PAAS) is a $1.5 billion market cap silver producer headquartered in Vancouver, Canada. Together with its subsidiaries, the company operates and develops silver producing properties and assets in Mexico, Peru, Argentina, and Bolivia. In addition to silver, the firm also produces and markets gold, zinc, lead, and copper, allowing it to diversify its income and reduce its exposure to a single commodity. However, unfavorable natural resource prices, along with expensive acquisitions, such as the 2012 purchase of all of the issued and outstanding common shares of Minefinders Corporation Ltd, have not been favorable. The price of the company’s stock has experienced a negative trend throughout the past few years, hitting one of its lowest points in 2014.

Although Pan American Silver Corp (NASDAQ:PAAS) has lost the backing of its largest institutional shareholder to date, the company continues to enjoy the support of numerous hedge funds. Jim Simons’s Renaissance Technologies continues to hold 1,092,047 shares, following the 812% increase disclosed by the fund last quarter. Eric Sprott’s Sprott Asset Management also remains bullish regarding the Canadian silver miner, with a stake of 649,775 shares. Another prestigious hedge fund worth mentioning is George Soros’ Soros Fund Management, which still holds 300,000 shares of Pan American Silver Corp, despite reducing its stake in the company by 63% last quarter.

Disclosure: Pablo Erbar holds no position in any stocks or funds mentioned.