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Were Hedge Funds Right About Warming Up To Royal Gold, Inc (RGLD)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Royal Gold, Inc (NASDAQ:RGLD) in this article.

Is Royal Gold, Inc (NASDAQ:RGLD) a bargain? Hedge funds are becoming hopeful. The number of bullish hedge fund bets inched up by 2 lately. Our calculations also showed that RGLD isn’t among the 30 most popular stocks among hedge funds (see the video below). RGLD was in 19 hedge funds’ portfolios at the end of the second quarter of 2019. There were 17 hedge funds in our database with RGLD positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

RGLD_oct2019

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the latest hedge fund action regarding Royal Gold, Inc (NASDAQ:RGLD).

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

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RGLD over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

TUDOR INVESTMENT CORP

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Murray Stahl’s Horizon Asset Management has the largest position in Royal Gold, Inc (NASDAQ:RGLD), worth close to $24.6 million, comprising 0.7% of its total 13F portfolio. The second most bullish fund manager is Matthew Hulsizer of PEAK6 Capital Management, with a $24.5 million call position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism include Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Renaissance Technologies.

Now, specific money managers have been driving this bullishness. Renaissance Technologies, initiated the biggest position in Royal Gold, Inc (NASDAQ:RGLD). Renaissance Technologies had $6.5 million invested in the company at the end of the quarter. Mark Broach’s Manatuck Hill Partners also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Paul Tudor Jones’s Tudor Investment Corp, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Royal Gold, Inc (NASDAQ:RGLD) but similarly valued. These stocks are Anaplan, Inc. (NYSE:PLAN), Perrigo Company plc (NYSE:PRGO), CyrusOne Inc (NASDAQ:CONE), and Signature Bank (NASDAQ:SBNY). This group of stocks’ market valuations match RGLD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLAN 37 1639092 15
PRGO 21 720516 3
CONE 18 173157 1
SBNY 29 513611 -7
Average 26.25 761594 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $762 million. That figure was $68 million in RGLD’s case. Anaplan, Inc. (NYSE:PLAN) is the most popular stock in this table. On the other hand CyrusOne Inc (NASDAQ:CONE) is the least popular one with only 18 bullish hedge fund positions. Royal Gold, Inc (NASDAQ:RGLD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on RGLD as the stock returned 20.5% during the same time frame and outperformed the market by an even larger margin.

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

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