Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Gold Resource Corporation (NYSE:GORO).
Gold Resource Corporation (NYSE:GORO) shareholders have witnessed a decrease in hedge fund sentiment of late. Gold Resource Corporation (NYSE:GORO) was in 6 hedge funds' portfolios at the end of March. The all time high for this statistic is 10. There were 7 hedge funds in our database with GORO positions at the end of the fourth quarter. Our calculations also showed that GORO isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
David Nierenberg of Nierenberg Investment
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 let's analyze the new hedge fund action encompassing Gold Resource Corporation (NYSE:GORO).
Do Hedge Funds Think GORO Is A Good Stock To Buy Now?
At Q1's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in GORO over the last 23 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Gold Resource Corporation (NYSE:GORO), with a stake worth $0.8 million reported as of the end of March. Trailing AQR Capital Management was Two Sigma Advisors, which amassed a stake valued at $0.4 million. Engineers Gate Manager, Citadel Investment Group, 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 Nierenberg Investment Management allocated the biggest weight to Gold Resource Corporation (NYSE:GORO), around 0.03% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to GORO.
Due to the fact that Gold Resource Corporation (NYSE:GORO) has experienced falling interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of hedge funds who sold off their full holdings in the first quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP cut the biggest position of all the hedgies followed by Insider Monkey, totaling close to $0.4 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds in the first quarter.
Let's now review hedge fund activity in other stocks similar to Gold Resource Corporation (NYSE:GORO). These stocks are Jowell Global Ltd. (NASDAQ:JWEL), Community Bankers Trust Corp. (NASDAQ:ESXB), Gencor Industries, Inc. (NASDAQ:GENC), Chemung Financial Corp. (NASDAQ:CHMG), Quad/Graphics, Inc. (NYSE:QUAD), OptiNose, Inc. (NASDAQ:OPTN), and Comstock Mining, Inc. (NYSE:LODE). This group of stocks' market valuations resemble GORO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JWEL,1,279,1 ESXB,6,19789,1 GENC,2,26276,-1 CHMG,3,8868,0 QUAD,10,9438,2 OPTN,10,6714,0 LODE,4,1097,0 Average,5.1,10352,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.1 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $2 million in GORO's case. Quad/Graphics, Inc. (NYSE:QUAD) is the most popular stock in this table. On the other hand Jowell Global Ltd. (NASDAQ:JWEL) is the least popular one with only 1 bullish hedge fund positions. Gold Resource Corporation (NYSE:GORO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GORO is 49.8. 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 positive signal but 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 beat the market again by 4.8 percentage points. Unfortunately GORO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GORO were disappointed as the stock returned -2.6% 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.