Gold stocks, as represented by the Market Vectors Gold Miners ETF, have underperformed the price of gold that is up by about 1% YTD. In comparison, the average gold stock is down by about 14% YTD, and is off about 34% below the highs that it set in September of last year. In this article, via an analysis based on the latest available Q1 institutional 13-F filings, we identify the large-cap gold and silver mining companies that are being accumulated and those being distributed by the world's largest fund managers.
These mega fund managers, such as Fidelity Investments, Goldman Sachs, BlackRock Inc., Vanguard Group, and 22 others, manage between $100 billion and over $1 trillion each, and together control about 40% of the assets invested in the U.S. equity markets. Together, these mega fund managers are bearish on the gold and silver mining group, cutting a net $300 million in Q1 from their $70.6 billion prior quarter position in the group. Furthermore, overall they are under-weight in the group by a factor of 0.5; that is, taken together, the 25 mega funds have invested 0.9% of their assets in the group, about half of the 1.8% weighting of the gold and silver group in the overall market (for more general information on these mega funds, please look at the end of the article).
The investing activities of these mega fund managers in small- and mid-cap gold and silver mining stocks were covered in a prior article. The following are large-cap gold and silver mining companies that these mega fund managers are most bullish about (see Table):
Eldorado Gold Corp. (EGO): EGO is a Canadian company acquiring, exploring and producing gold and mineral properties in Turkey, China, Brazil and Greece. Mega funds together added a net 45.21 million shares in Q1 to their 184.68 million share prior quarter position in the company, and taken together mega funds held $2.78 billion or 32.3% of the outstanding shares.
The top buyer was the world's largest and most prominent asset manager, Blackrock Inc., with over $3.5 trillion in assets under management that purchased 35.75 million shares. Other large mega fund purchasers included JPMorgan Chase & Co. (4.71 million shares), with $1.4 trillion in assets under management, and Toronto-based Royal Bank of Canada (3.36 million shares), with $107 billion in 13-F assets. Overall, institutional investors loaded up on EGO in Q1, adding 80.6 million shares to their 388.2 million share prior quarter position.
In its latest Q1 (March), EGO missed revenue and earnings estimates, reporting $271.5 million and 13c v/s analyst estimates of $330.8 million and 17c. Its shares trade near multi-year lows, cut in half from the highs in September of last year, taking a further dive after news late last week that Greece's Supreme Administrative Court ordered the suspension of all tree-cutting activities in a forest area in Halkidiki owned by a subsidiary of the company.
At current prices in the $11 range, the stock trades at 13-14 forward P/E and 1.4 P/B compared to averages of 10.7 and 2.2 for its peers in the gold mining group, while earnings are projected to grow at a strong 18.9% annual rate from 58c in 2011 to 82c in 2013. Wall Street analysts have a price target of $20 on the stock, well above current prices in the $11 range.
Other large-cap gold and silver companies that mega fund managers are bullish about include:
- Yamana Gold Inc. (AUY), a Canadian company engaged in the exploration and development of gold properties in South America and Mexico, in which mega funds together added a net 4.81 million shares to their 167.45 million share prior quarter position in the company;
- Newmont Mining Corp. (NEM), that produces gold in the U.S., Australia, Peru, Indonesia, Canada, New Zealand, Ghana and Mexico, in which mega funds together added a net 1.34 million shares to their 191.50 million share prior quarter position in the company;
The following are large-cap gold and silver companies that mega funds are bearish about (see Table):
- Barrick Gold Corporation (ABX), a Canadian company engaged in production of gold and copper in Peru, Canada, U.S., Australia, Chile, and five other countries, in which mega funds together cut a net 11.25 million shares from their 267.20 million share prior quarter position in the company;
- Goldcorp Inc. (GG), a Canadian company engaged in mining and exploration of silver, copper and gold throughout North and South America, in which mega funds together cut a net 3.91 million shares from their 189.54 million share prior quarter position in the company;
- Silver Wheaton Corp. (SLW), a Canadian buyer of purchase agreements for silver and gold from mining companies operating in Mexico, Sweden and Peru, in which mega funds together cut a net 4.15 million shares from their 60.37 million share prior quarter position in the company;
- Freeport McMoran Copper & Gold (FCX), that is engaged in the exploration and development of copper, gold, silver and molybdenum mines in Indonesia, North and South America, in which mega funds together cut a net 3.25 million shares from their 309.35 million share prior quarter position in the company;
- Kinross Gold Corp. (KGC), that is engaged in mining and processing gold, silver, and copper in the U.S., Brazil, Ecuador, Chile and Russia, in which mega funds together cut a net 10.52 million shares from their 289.48 million share prior quarter position in the company;
- Randgold Resources ADR (GOLD), that is engaged in the exploration and development of gold properties primarily in Mali and Cote D'Ivorie, in which mega funds together cut a net 0.94 million shares from their 24.93 million share prior quarter position in the company; and
- Agnico Eagle Mines Ltd. (AEM), that is a Canadian company engaged in the production, development and exploration of gold in Canada, U.S., Finland and Mexico, in which mega funds together cut a net 1.79 million shares from their 45.13 million share prior quarter position in the company.
Furthermore, the following are additional large-cap gold and silver companies that are among the top holdings of mega funds in the group (see Table):
- Ivanhoe Mines Ltd. (IVN), a Canadian company engaged primarily in the exploration of gold and copper mines in central Asia and the Asian Pacific region, in which mega funds together hold 94.13 million or 12.7% of the outstanding shares; and
- Gold Fields Ltd. (GFI), a South African mining company engaged in the exploration and extraction of gold in South Africa, Ghana, Australia and Peru, in which mega funds together hold 29.17 million or 4.0% of the outstanding shares.
General Methodology and Background Information: The latest available institutional 13-F filings of the largest 25 mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.
This article is part of a series on institutional holdings in various industry groups and sectors, and other articles in the series for this and prior quarters can be accessed from our author page.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.