Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Osisko Gold Royalties Ltd (NYSE:OR) based on that data and determine whether they were really smart about the stock.
Hedge fund interest in Osisko Gold Royalties Ltd (NYSE:OR) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), AdaptHealth Corp. (NASDAQ:AHCO), and Azul S.A. (NYSE:AZUL) to gather more data points. Our calculations also showed that OR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_27480" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 8 states that allow euthanasia to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the fresh hedge fund action encompassing Osisko Gold Royalties Ltd (NYSE:OR).
Hedge fund activity in Osisko Gold Royalties Ltd (NYSE:OR)
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OR over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Eric Sprott's Sprott Asset Management has the largest position in Osisko Gold Royalties Ltd (NYSE:OR), worth close to $35.3 million, accounting for 3.2% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $21 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions include Peter Franklin Palmedo's Sun Valley Gold, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Sprott Asset Management allocated the biggest weight to Osisko Gold Royalties Ltd (NYSE:OR), around 3.24% of its 13F portfolio. Sun Valley Gold is also relatively very bullish on the stock, designating 1.45 percent of its 13F equity portfolio to OR.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: GLG Partners. 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 Marshall Wace LLP).
Let's also examine hedge fund activity in other stocks similar to Osisko Gold Royalties Ltd (NYSE:OR). We will take a look at Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), AdaptHealth Corp. (NASDAQ:AHCO), Azul S.A. (NYSE:AZUL), and Delek US Holdings, Inc. (NYSE:DK). All of these stocks' market caps are similar to OR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRHC,7,18000,1 AHCO,10,349980,0 AZUL,8,49217,-3 DK,16,202953,-3 Average,10.25,155038,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $102 million in OR's case. Delek US Holdings, Inc. (NYSE:DK) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 7 bullish hedge fund positions. Osisko Gold Royalties Ltd (NYSE:OR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on OR as the stock returned 31.6% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.