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This Metric Says You Are Smart to Buy Royal Gold, Inc USA) (NASDAQ:RGLD)

Royal Gold, Inc USA) (NASDAQ:RGLD) investors should be aware of an increase in enthusiasm from smart money recently.

If you’d ask most investors, hedge funds are viewed as unimportant, outdated financial vehicles of the past. While there are more than 8000 funds in operation at present, we look at the moguls of this club, around 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total capital, and by monitoring their top equity investments, we have come up with a number of investment strategies that have historically beaten the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Just as integral, positive insider trading activity is another way to parse down the marketplace. Just as you’d expect, there are a number of incentives for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would buy. Several empirical studies have demonstrated the market-beating potential of this tactic if you know where to look (learn more here).

Now, we’re going to take a glance at the key action encompassing Royal Gold, Inc USA) (NASDAQ:RGLD).

What have hedge funds been doing with Royal Gold, Inc USA) (NASDAQ:RGLD)?

At the end of the fourth quarter, a total of 26 of the hedge funds we track held long positions in this stock, a change of 37% from the third quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially.

According to our comprehensive database, Jean-Marie Eveillard’s First Eagle Investment Management had the most valuable position in Royal Gold, Inc USA) (NASDAQ:RGLD), worth close to $71 million, accounting for 0.3% of its total 13F portfolio. On First Eagle Investment Management’s heels is Jim Simons of Renaissance Technologies, with a $34 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that are bullish include Bart Baum’s Ionic Capital Management, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners and Ken Griffin’s Citadel Investment Group.

Consequently, specific money managers were breaking ground themselves. Ionic Capital Management, managed by Bart Baum, initiated the largest call position in Royal Gold, Inc USA) (NASDAQ:RGLD). Ionic Capital Management had 17 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $9 million position during the quarter. The other funds with brand new RGLD positions are Steven Cohen’s SAC Capital Advisors, Philippe Jabre’s Jabre Capital Partners, and Phill Gross and Robert Atchinson’s Adage Capital Management.

How have insiders been trading Royal Gold, Inc USA) (NASDAQ:RGLD)?

Bullish insider trading is particularly usable when the primary stock in question has seen transactions within the past 180 days. Over the latest 180-day time period, Royal Gold, Inc USA) (NASDAQ:RGLD) has seen 1 unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

With the returns shown by the aforementioned studies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Royal Gold, Inc USA) (NASDAQ:RGLD) is an important part of this process.

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Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.