Were Hedge Funds Right About Piling Into Barrick Gold Corporation (GOLD)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Barrick Gold Corporation (NYSE:GOLD) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Barrick Gold Corporation (NYSE:GOLD) was in 54 hedge funds’ portfolios at the end of March. GOLD shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 51 hedge funds in our database with GOLD positions at the end of the previous quarter. Our calculations also showed that GOLD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Steven Tananbaum - GoldenTree Asset Management

Steven Tananbaum of GoldenTree Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Barrick Gold Corporation (NYSE:GOLD).

Hedge fund activity in Barrick Gold Corporation (NYSE:GOLD)

At the end of the first quarter, a total of 54 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GOLD over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is GOLD A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Barrick Gold Corporation (NYSE:GOLD), with a stake worth $460.4 million reported as of the end of September. Trailing Renaissance Technologies was Slate Path Capital, which amassed a stake valued at $185.9 million. Citadel Investment Group, Adage Capital Management, and Oldfield Partners 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 Tegean Capital Management allocated the biggest weight to Barrick Gold Corporation (NYSE:GOLD), around 16.61% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, setting aside 14.25 percent of its 13F equity portfolio to GOLD.

As one would reasonably expect, key money managers have been driving this bullishness. Waratah Capital Advisors, managed by Brad Dunkley and Blair Levinsky, assembled the most valuable position in Barrick Gold Corporation (NYSE:GOLD). Waratah Capital Advisors had $42.1 million invested in the company at the end of the quarter. Jeff Osher’s No Street Capital also made a $19.2 million investment in the stock during the quarter. The following funds were also among the new GOLD investors: Steve Cohen’s Point72 Asset Management, Steven Tananbaum’s GoldenTree Asset Management, and Ari Zweiman’s 683 Capital Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Barrick Gold Corporation (NYSE:GOLD) but similarly valued. We will take a look at Las Vegas Sands Corp. (NYSE:LVS), Prudential Public Limited Company (NYSE:PUK), Bank of Montreal (NYSE:BMO), and Enterprise Products Partners L.P. (NYSE:EPD). This group of stocks’ market caps match GOLD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LVS 42 1186415 5
PUK 6 43832 0
BMO 13 150563 0
EPD 26 215411 -2
Average 21.75 399055 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $399 million. That figure was $1756 million in GOLD’s case. Las Vegas Sands Corp. (NYSE:LVS) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Barrick Gold Corporation (NYSE:GOLD) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on GOLD as the stock returned 47.5% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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