The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Paramount Gold Nevada Corp (NYSE:PZG) based on those filings.
Hedge fund interest in Paramount Gold Nevada Corp (NYSE:PZG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that PZG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare PZG to other stocks including Petros Pharmaceuticals, Inc. (NASDAQ:PTPI), ADiTx Therapeutics, Inc. (NASDAQ:ADTX), and Conifer Holdings, Inc. (NASDAQ:CNFR) to get a better sense of its popularity.
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.
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 wants to buy this $28 biotech stock for $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. Now let's analyze the recent hedge fund action encompassing Paramount Gold Nevada Corp (NYSE:PZG).
Do Hedge Funds Think PZG Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PZG over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Sprott Asset Management held the most valuable stake in Paramount Gold Nevada Corp (NYSE:PZG), which was worth $0.3 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $0.2 million worth of shares. Citadel Investment Group was 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 Sprott Asset Management allocated the biggest weight to Paramount Gold Nevada Corp (NYSE:PZG), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0003 percent of its 13F equity portfolio to PZG.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Weiss Asset Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let's go over hedge fund activity in other stocks – not necessarily in the same industry as Paramount Gold Nevada Corp (NYSE:PZG) but similarly valued. We will take a look at Petros Pharmaceuticals, Inc. (NASDAQ:PTPI), ADiTx Therapeutics, Inc. (NASDAQ:ADTX), Conifer Holdings, Inc. (NASDAQ:CNFR), Wheeler Real Estate Investment Trust Inc (NASDAQ:WHLR), ReTo Eco-Solutions, Inc. (NASDAQ:RETO), China Green Agriculture, Inc (NYSE:CGA), and SPAR Group, Inc. (NASDAQ:SGRP). This group of stocks' market values resemble PZG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PTPI,2,823,0 ADTX,2,568,2 CNFR,1,150,1 WHLR,2,973,1 RETO,2,872,0 CGA,1,269,0 SGRP,2,380,0 Average,1.7,576,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.7 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in PZG's case. Petros Pharmaceuticals, Inc. (NASDAQ:PTPI) is the most popular stock in this table. On the other hand Conifer Holdings, Inc. (NASDAQ:CNFR) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Paramount Gold Nevada Corp (NYSE:PZG) is more popular among hedge funds. Our overall hedge fund sentiment score for PZG is 85. 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. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately PZG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on PZG were disappointed as the stock returned 5% since the end of the first quarter (through 6/11) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
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