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Were Hedge Funds Right About Hecla Mining Company (HL)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Hecla Mining Company (NYSE:HL) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Hecla Mining Company (NYSE:HL) a cheap stock to buy now? Prominent investors are becoming more confident. The number of long hedge fund bets advanced by 4 lately. Our calculations also showed that HL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). HL was in 14 hedge funds’ portfolios at the end of December. There were 10 hedge funds in our database with HL holdings at the end of the previous quarter.

In the 21st century investor’s toolkit there are a multitude of formulas stock traders use to analyze stocks. Two of the most useful formulas are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can beat the market by a healthy amount (see the details here).

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the fresh hedge fund action surrounding Hecla Mining Company (NYSE:HL).

How are hedge funds trading Hecla Mining Company (NYSE:HL)?

Heading into the first quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in HL a year ago. So, let’s check 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 Hecla Mining Company (NYSE:HL), which was worth $32 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $13.9 million worth of shares. Millennium Management, Luminus Management, and Citadel Investment Group 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 Luminus Management allocated the biggest weight to Hecla Mining Company (NYSE:HL), around 0.51% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 0.38 percent of its 13F equity portfolio to HL.

Now, some big names have jumped into Hecla Mining Company (NYSE:HL) headfirst. Luminus Management, managed by Jonathan Barrett and Paul Segal, established the most outsized position in Hecla Mining Company (NYSE:HL). Luminus Management had $12.2 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new HL investors: Nick Thakore’s Diametric Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s also examine hedge fund activity in other stocks similar to Hecla Mining Company (NYSE:HL). These stocks are Tilray, Inc. (NASDAQ:TLRY), CSG Systems International, Inc. (NASDAQ:CSGS), Cardiovascular Systems Inc (NASDAQ:CSII), and Kulicke and Soffa Industries Inc. (NASDAQ:KLIC). This group of stocks’ market values match HL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TLRY 15 41042 0
CSGS 23 238394 3
CSII 16 135257 -1
KLIC 22 340478 2
Average 19 188793 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $79 million in HL’s case. CSG Systems International, Inc. (NASDAQ:CSGS) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Hecla Mining Company (NYSE:HL) is even less popular than TLRY. Hedge funds dodged a bullet by taking a bearish stance towards HL. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately HL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HL investors were disappointed as the stock returned -44.8% during the same time period 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 most of these stocks already outperformed the market so far in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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