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Were Hedge Funds Right About Piling Into Pretium Resources Inc (PVG)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Pretium Resources Inc (NYSE:PVG) and determine whether hedge funds had an edge regarding this stock.

Is Pretium Resources Inc (NYSE:PVG) a buy right now? Hedge funds were taking a bullish view. The number of bullish hedge fund positions went up by 1 in recent months. Our calculations also showed that PVG 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). PVG was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 24 hedge funds in our database with PVG holdings at the end of the previous quarter.

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

In the financial world there are tons of formulas market participants can use to evaluate their holdings. A duo of the best formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top fund managers can outclass the S&P 500 by a solid amount (see the details here).

MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we’re going to view the new hedge fund action regarding Pretium Resources Inc (NYSE:PVG).

How have hedgies been trading Pretium Resources Inc (NYSE:PVG)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in PVG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PVG A Good Stock To Buy?

More specifically, Paulson & Co was the largest shareholder of Pretium Resources Inc (NYSE:PVG), with a stake worth $13.6 million reported as of the end of September. Trailing Paulson & Co was Bridger Management, which amassed a stake valued at $8 million. Citadel Investment Group, Renaissance Technologies, and D E Shaw 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 Sound Point Capital allocated the biggest weight to Pretium Resources Inc (NYSE:PVG), around 5.32% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, designating 0.92 percent of its 13F equity portfolio to PVG.

Consequently, some big names were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Pretium Resources Inc (NYSE:PVG). Arrowstreet Capital had $4 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $3.1 million position during the quarter. The following funds were also among the new PVG investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Matthew Hulsizer’s PEAK6 Capital Management, and Peter Muller’s PDT Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pretium Resources Inc (NYSE:PVG) but similarly valued. We will take a look at Addus Homecare Corporation (NASDAQ:ADUS), Alamo Group, Inc. (NYSE:ALG), ShockWave Medical, Inc. (NASDAQ:SWAV), and Futu Holdings Limited (NASDAQ:FUTU). All of these stocks’ market caps are closest to PVG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ADUS 15 65282 -2
ALG 8 132111 1
SWAV 10 70180 -5
FUTU 3 452 0
Average 9 67006 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $67 million in PVG’s case. Addus Homecare Corporation (NASDAQ:ADUS) is the most popular stock in this table. On the other hand Futu Holdings Limited (NASDAQ:FUTU) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Pretium Resources Inc (NYSE:PVG) 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 PVG as the stock returned 48.1% 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.