Top 5 Precious Metals Stocks Among Hedge Funds

Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Insider Monkey has processed hundreds of 13F filings from hedge funds and other notable investors for the fourth quarter of 2012; these filings disclose many long equity positions that the investors in question held at the end of December. By aggregating 13F filings, we can develop investment strategies including imitating hedge funds’ most popular stocks in various categories. The most popular small-cap stocks among hedge funds stand out in particular; these stocks outperformed the S&P 500 by 18 percentage points per year between 1999 and 2009 (see how to use this market-beating strategy yourself).

Another way to use this information is by pooling the filings and seeing which stocks in different sectors were the most popular among the filers that we consider. Here are the top five stocks in the precious metals industry that the largest number of hedge funds owned at the end of December.

Freeport-McMoRan Copper & Gold (NYSE: FCX) is a copper, gold and molybdenum mining company. The company has large open-pit and underground mining operations in North America, South America and Africa. Freeport-McMoRan released its Q4 earnings in late January, announcing that net income attributable to common stock for Q4 of 2012 was $743 million, or $0.78 per share, compared with net income of $640 million, or $0.67 per share, for Q4 of 2011. Net income for the year 2012 was lower at $3.0 billion, $3.19 per share, compared with $4.6 billion, $4.78 per share, for 2011.

The more interesting recent news for Freeport-McMoran is its proposed acquisition of Plains Exploration and Production Co. and McMoRan Exploration Company. These acquisitions would expand Freeport-McMoRan’s activities into oil and gas exploration and development.  McMoRan was spun off as a separate company in 1994, and thus the proposed acquisition would bring McMoRan back into the fold.

The market initially disapproved of the proposed acquisitions, as Freeport-McMoRan's stock price dropped approximately 15% upon the announcement in early December. Many investors have previously viewed this as a proxy for copper, and the recent drop in both copper and gold prices may be a partial explanation for this recent downward movement.

Still, much of Freeport-McMoRan’s stock price movement may be influenced by hedgies engaged in merger-arbitrage strategies in connection with the proposed acquisitions. At the end of Q4, some funds increased their holdings in the company, including Ray Dalio (see Dalio and Bridgewater's full equity portfolio).

Next up on our list we have Newmont Mining (NYSE: NEM), which is a gold producer, with gold and copper properties in the U.S., Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Newmont recently released earnings, reporting net income from continuing operations of $1.9 billion or $3.80 per share in 2012, compared with $0.5 billion, or $1.02 per share in 2011. Revenue for 2012 was $9.9 Billion, versus $10.4 billion for 2011. 

Newmont reported attributable gold production of 5 million ounces, and copper production of 143 million pounds for 2012. The company's share price has dropped recently, likely in concert with the drop in the price of gold.  Some hedge funds have recently decreased their positions in the company; Libra Advisors recently cut its holdings in Newmont, but still holds a decently sized stake (see this hedge fund's newest picks).

Barrick Gold (NYSE: ABX) is a gold and mining development company that also has some oil and gas activities. The company recently released disappointing earnings for Q4 of 2012, with a net loss of $3.06 billion at $3.06 per share compared with a profit of $959 million, or 96 cents a share, a year earlier.  This included a $3.8 billion write-down related to a copper mine the company acquired in Zambia a few years ago. However, Barrick did predict gold production of approximately 7.0 to 7.4 million ounces for full-year 2013.

Goldcorp (NYSE: GG) comes in fourth, and is another gold miner. It has major operations at Cerro Negro in Argentina, Éléonore in Quebec, and Cochenour in Red Lake, Canada. The company had production of 700,400 ounces for Q4 and 2,396,200 ounces for all of 2012, compared with 687,900 ounces in Q4 of 2011 and 2,514,700 ounces for all of 2011. Revenues for Q4 2012 totaled $1.4 billion on gold sales of 645,100 ounces. Goldcorp has a current dividend yield of 1.8%, with increased dividends of $438 million paid in 2012, versus dividends of $330 million in 2011. The company's stock is trading below its 50-day and 200-day SMA and is off over 35% from its 52-week high of $47 in September of 2012.

Kinross Gold Corp. (NYSE: KGC), lastly, is engaged in the production, acquisition, exploration and development of gold properties principally in Canada, the United States, Russia, Brazil, Ecuador, Chile, Ghana and Mauritania. The company has a current dividend yield of 2.11%, and recently reported a net loss from continuing operations for 2012 of $2.5 billion ($2.24 per share) compared with a net loss of $2 billion ($1.84 per share) in 2011. On the flip side, revenue for 2012 increased to $4.3 billion, compared with $3.8 billion for 2011. 

A major component of the reported loss is a disappointing $3.09 billion write-down for its Tasiast mine project. The share price is trading lower than the 50-day and 200-day SMA and is down over 34% from its 52-week high in October of 2012. With results like this, though, it’s important to pay attention to the smart money’s consensus sentiment.


This article is written by Joshua Reider and edited by Jake Mann. Insider Monkey's Editor-in-Chief is Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article.  The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure