Hedge Funds Aren’t Crazy About Yamana Gold Inc. (AUY) Anymore

Abigail Fisher

Fri, Mar 27, 2020, 7:53 PM 6 min read

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity 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 December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Yamana Gold Inc. (NYSE:AUY) based on those filings.

Is Yamana Gold Inc. (NYSE:AUY) a buy here? Money managers are reducing their bets on the stock. The number of long hedge fund bets were cut by 5 lately. Our calculations also showed that AUY isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_340081" align="aligncenter" width="399"]

Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to check out the new hedge fund action encompassing Yamana Gold Inc. (NYSE:AUY).

What does smart money think about Yamana Gold Inc. (NYSE:AUY)?

At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in AUY a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Yamana Gold Inc. (NYSE:AUY), with a stake worth $124.2 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $70.5 million. Two Sigma Advisors, Adage Capital Management, 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 Signition LP allocated the biggest weight to Yamana Gold Inc. (NYSE:AUY), around 0.73% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to AUY.

Due to the fact that Yamana Gold Inc. (NYSE:AUY) has experienced falling interest from the smart money, logic holds that there is a sect of funds that slashed their entire stakes by the end of the third quarter. At the top of the heap, Israel Englander's Millennium Management cut the biggest investment of all the hedgies watched by Insider Monkey, totaling close to $27.7 million in stock. David Halpert's fund, Prince Street Capital Management, also dropped its stock, about $17.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Yamana Gold Inc. (NYSE:AUY) but similarly valued. We will take a look at SiteOne Landscape Supply, Inc. (NYSE:SITE), AppFolio Inc (NASDAQ:APPF), ASGN Incorporated (NYSE:ASGN), and SAGE Therapeutics Inc (NASDAQ:SAGE). This group of stocks' market values are similar to AUY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SITE,15,108926,1 APPF,16,240264,4 ASGN,18,98512,1 SAGE,35,339592,3 Average,21,196824,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $263 million in AUY's case. SAGE Therapeutics Inc (NASDAQ:SAGE) is the most popular stock in this table. On the other hand SiteOne Landscape Supply, Inc. (NYSE:SITE) is the least popular one with only 15 bullish hedge fund positions. Yamana Gold Inc. (NYSE:AUY) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on AUY as the stock returned -17% during the same time period and outperformed the market by an even larger margin.