Vista Gold Corp. (VGZ): Are Hedge Funds Right About This Stock?

Is Vista Gold Corp. (NYSEAMEX:VGZ) a buy, sell, or hold? The smart money is selling. The number of long hedge fund positions retreated by 1 lately.

According to most investors, hedge funds are seen as underperforming, old investment vehicles of the past. While there are over 8000 funds in operation today, we look at the leaders of this club, close to 450 funds. It is widely believed that this group has its hands on the lion’s share of the hedge fund industry’s total capital, and by watching their highest performing investments, we have found a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as important, bullish insider trading sentiment is another way to break down the world of equities. Just as you’d expect, there are a variety of motivations for a corporate insider to downsize shares of his or her company, but just one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this strategy if you know what to do (learn more here).

With these “truths” under our belt, it’s important to take a peek at the key action surrounding Vista Gold Corp. (NYSEAMEX:VGZ).

How have hedgies been trading Vista Gold Corp. (NYSEAMEX:VGZ)?

At Q1’s end, a total of 8 of the hedge funds we track held long positions in this stock, a change of -11% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially.

Of the funds we track, Sun Valley Gold, managed by Peter Franklin Palmedo, holds the biggest position in Vista Gold Corp. (NYSEAMEX:VGZ). Sun Valley Gold has a $26.1 million position in the stock, comprising 0.9% of its 13F portfolio. On Sun Valley Gold’s heels is Sprott Asset Management, managed by Eric Sprott, which held a $13.3 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Chuck Royce’s Royce & Associates, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management.

Judging by the fact that Vista Gold Corp. (NYSEAMEX:VGZ) has faced declining sentiment from the smart money, it’s safe to say that there exists a select few money managers who sold off their full holdings last quarter. Interestingly, Israel Englander’s Millennium Management sold off the largest position of the 450+ funds we monitor, totaling an estimated $0.1 million in stock.. Steven Cohen’s fund, SAC Capital Advisors, also dumped its stock, about $0.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds last quarter.

How have insiders been trading Vista Gold Corp. (NYSEAMEX:VGZ)?

Insider buying is best served when the company in question has seen transactions within the past half-year. Over the last half-year time period, Vista Gold Corp. (NYSEAMEX:VGZ) has experienced 1 unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Vista Gold Corp. (NYSEAMEX:VGZ). These stocks are Comstock Mining, Inc. (NYSEAMEX:LODE), Lake Shore Gold Corp Ordinary Shares (Canada) (NYSEAMEX:LSG), International Tower Hill Mines Ltd(USA] (NYSEAMEX:THM), Midway Gold Corp (USA) (NYSEAMEX:MDW), and Brigus Gold Corp (USA) (NYSEAMEX:BRD). All of these stocks are in the gold industry and their market caps are closest to VGZ’s market cap.