We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Platinum Group Metals Limited (NYSE:PLG).
Is Platinum Group Metals Limited (NYSE:PLG) undervalued? Hedge funds were turning less bullish. The number of bullish hedge fund bets dropped by 1 recently. Platinum Group Metals Limited (NYSE:PLG) was in 6 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 7. Our calculations also showed that PLG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 7 hedge funds in our database with PLG holdings at the end of December.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Eric Sprott of Sprott Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a look at the key hedge fund action regarding Platinum Group Metals Limited (NYSE:PLG).
Do Hedge Funds Think PLG Is A Good Stock To Buy Now?
At the end of March, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in PLG a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
The largest stake in Platinum Group Metals Limited (NYSE:PLG) was held by CQS Cayman LP, which reported holding $3.4 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $1 million position. Other investors bullish on the company included Sprott Asset Management, Two Sigma Advisors, and Renaissance Technologies. In terms of the portfolio weights assigned to each position CQS Cayman LP allocated the biggest weight to Platinum Group Metals Limited (NYSE:PLG), around 0.21% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to PLG.
Since Platinum Group Metals Limited (NYSE:PLG) has faced a decline in interest from hedge fund managers, logic holds that there exists a select few fund managers who sold off their full holdings last quarter. At the top of the heap, Donald Sussman's Paloma Partners dropped the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $0.3 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund sold off about $0.1 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Platinum Group Metals Limited (NYSE:PLG). These stocks are Value Line, Inc. (NASDAQ:VALU), Vincerx Pharma, Inc. (NASDAQ:VINC), Cerecor Inc. (NASDAQ:CERC), BioVie Inc. (NASDAQ:BIVI), Park Aerospace Corp. (NYSE:PKE), BurgerFi International, Inc. (NASDAQ:BFI), and Cabaletta Bio, Inc. (NASDAQ:CABA). This group of stocks' market caps are similar to PLG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VALU,2,2401,0 VINC,16,88367,5 CERC,10,145224,2 BIVI,1,447,0 PKE,8,33491,-5 BFI,9,51873,4 CABA,11,91768,3 Average,8.1,59082,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $5 million in PLG's case. Vincerx Pharma, Inc. (NASDAQ:VINC) is the most popular stock in this table. On the other hand BioVie Inc. (NASDAQ:BIVI) is the least popular one with only 1 bullish hedge fund positions. Platinum Group Metals Limited (NYSE:PLG) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PLG is 46.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately PLG wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PLG investors were disappointed as the stock returned -2.9% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.