In this article we presented the 10 best gold stocks to buy now using billionaire quant hedge fund Renaissance Technologies' stock picks. Click to skip ahead and see the 5 Best Gold Stocks To Buy Now.
The billionaire investor Jim Simons is among the most successful hedge fund managers since he founded Renaissance Technologies Corporation in 1982. One of the greatest investors of all time, Jim Simons, like to play with market volatility based on the strategy that almost takes the human element out of investing. The hedge fund with more than $100 billion in asset management uses various complex mathematical models for stock pickings and trade executions. Here is what we said about RenTech previously in two separate articles:
"Jim Simons’ Medallion Fund is the best hedge fund that Insider Monkey has come across. The fund’s returns are so spectacular that Jim Simons became one of the richest people on the planet. Medallion Fund employs high frequency trading and exploits inefficiencies in the stock market. One strategy they use takes advantage of the inefficiencies in the execution of large transactions. One of their algorithms determines whether a very large order is executed and front runs it. As a result Medallion experiences high transaction costs and high expenses. That’s why they charge a 5% fixed fee. On top of that they charge performance fee. That fee had been 20%, but after 2000 it increased initially to 36% and then to 44%.
Renaissance Technologies Corporation's computer-based model of predicting market trends failed to accurately forecast the pandemic shock during the first half of the year as shutdowns and the global economic downturn has led the hedge fund to post a double-digit loss in the first half of the year. The firm managed to recover those losses during the second half of the year on the back of a recovery in the broader market index.
The firm has generated profits from investments in gold stocks throughout this year. Before starting a countdown on RenTech's profitable gold investments, let's briefly review how this billionaire investor's hedge fund has made changes in its portfolio to beat the market.
On the positive side, Renaissance Technologies' strategy of diversifying its portfolio towards numerous industries and assets helped in reducing the impact of the economic shock.
RENAISSANCE TECHNOLOGIES
Jim Simons of Renaissance Technologies
In addition, the Long Island-based group that is managing more than $100 billion in assets has made aggressive changes in the stock portfolio during September to align with the market trends. The hedge fund has bought 495 stocks during the third quarter and added to its 1159 positions. Meanwhile, the firm has sold out 547 stocks and reduced positions in 1673 equities in the September quarter. The market value of Renaissance Technologies portfolio fell from $115 billion to $100 billion, according to the latest filings. You should keep in mind that most of these changes are a result of high frequency trading. However, the fund's largest positions are likely to be longer term bets made by its Institutional Equities Fund.
While Jim Simons reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 78 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 significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Gold has outperformed the broader market trends this year despite pandemic related challenges and market uncertainties. Let’s start examining the 10 best gold stocks to buy now according to Rentech's quantitatively picked biggest gold stocks.
RGLD ranks 10th in our list of the 10 best gold stocks to buy now. Royal Gold has been a member of Jim Simons stock portfolio since the second quarter of 2018. Although Simons’ hedge fund Renaissance Technologies has sold 9% of shares in the latest quarter, Royal Gold still accounts for 0.10% of the overall portfolio and it is the tenth-largest gold stock that Simons believes is a good buy. First Eagle Asset Management is also a big RGLD bull with a $300 million position at the end of September.
Royal Gold has been offering returns both in the form of share price gains and dividends. Last month, it raised the quarterly dividend by 7% to $0.30 per share, marking the 19th straight year of a dividend increase. Meanwhile, its share price soared almost 189% in the past five years. The sharp growth in gold price added to Royal Gold revenue growth in the past few quarters. Gold accounts for 75% of overall revenue.
The North American gold miner Alamos Gold (NYSE: AGI) is the ninth largest gold stock position in Jim Simons portfolio, valued at $105 million. The billionaire hedge fund has first initiated a stake in the gold mining company during the fourth quarter of 2017. Alamos Gold accounted for 0.11% of $100 billion worth of Simons portfolio at the end of the third quarter, according to the latest filings.
Shares of Alamos Gold rallied almost 48% since the beginning of this year, extending the five years gains to 180%. In addition to massive returns through capital appreciation, the gold mining company has also been offering relatively small dividends when compared to Royal Gold.
Alamos Gold has generated record third-quarter earnings and free cash flows, driven by robust growth in gold prices along with the cost-cutting initiatives at its two mines in Canada and one mine in Mexico.
“We remain focused on operating a sustainable business model that can support growing returns to shareholders over the long term. Given our strong free cash flow outlook, we are pleased to announce a 33% increase in our dividend, which has now grown by 300% since 2018,” said John A. McCluskey, President, and Chief Executive Officer.
Palm Valley Capital talked about AGI in its Q1 investor letter. Here is what they said:
“Alamos Gold (AGI) is a Canadian-based gold producer with three operating mines in North America. We believe Alamos’s 9.7 million ounces of proven and probable gold reserves are selling at a discount to our calculated replacement valuation. Furthermore, we are attracted to the company’s debt-free balance sheet and its ability to generate free cash flow at current gold prices. As global central banks aggressively expand their balance sheets, we are comforted owning Alamos’s high-quality tangible assets.”
WPM ranks 8th in our list of the 10 best gold stocks to buy now. The Canada based mining company Wheaton Precious Metals Corp (NYSE: WPM) is a permanent member of Renaissance Technologies since the third quarter of 2016. The hedge fund managing $100 billion worth of portfolio slashed its stake by 27% in Wheaton during the September quarter to capitalize on massive share price gains.
Shares of Wheaton Precious Metals Corp jumped 46% in the last twelve months and the stock price is up 200% in the past five years. Despite selling 1 million shares in the latest quarter, the Canada-based mining company accounts for 0.14% of the overall portfolio, representing the eighth largest gold-stock investment. Wheaton also offers a dividend yield above 1%. The company has generated 23% year over year revenue growth in the latest quarter.
First Eagle Asset Management is also a big WPM bull and shared their WPM thesis in their Q2 investor letter:
“The strength in the price of gold was generally supportive of gold-related equities whose performance historically has been leveraged to the gold price. One such example is Wheaton Precious Metals, a Canadian streaming company that maintains, in our view, a high-quality, low-cost portfolio of precious metal purchase agreements that is well diversified across mining partners, geographies and metal types. Despite pandemic-related suspensions of six of its mining assets, Wheaton posted a 50% year-over-year increase in operating cash flow for the first quarter, which allowed the company to reduce its net debt while raising its quarterly dividend payment.”
South Africa based Gold Fields Limited (NYSE: GFI) is the seventh-largest gold stock in Jim Simons portfolio valued at $202 million. The Gold Fields stake accounts for 0.14% of the overall portfolio. While the billionaire hedge fund sold its 27% position in the latest quarter to capitalize on share price gains, Gold Fields has been a permanent member of Jim Simons portfolio since 2011.
After a share price rally of 40% in the last twelve months, Gold Fields five years stock gains reached 220%. South Africa based Gold Fields Limited operates as a gold producer with reserves and resources in South Africa, Chile, Australia, Ghana, and Peru. It holds interests in nine operating mines with an annual gold-equivalent production of approximately 2.2 million ounces, as well as gold mineral reserves of approximately 51.3 million ounces.
Formerly known as Newmarket Gold, Kirkland Lake Gold (NYSE: KL) has been a member of Jim Simons portfolio since the third quarter of 2017. It is the sixth best gold stock to buy according to the billionaire's hedge fund. The Kirkland Lake Gold stake accounts for 0.21% of the portfolio valued at $206 million.
Shares of Kirkland underperformed this year despite a sharp growth in gold prices. Lower than expected revenues in the September quarter added to share price selloff. Its third-quarter revenue of $632 million jumped 70% from the past year period, missing analysts' expectations by over $3 million.
The company says cash returns to investors is the key component of their business strategy. “Another key component of our strategy is returning capital to shareholders. In February, we announced our goal to repurchase 20.0 million shares over a 12 to 24-month period and have already reached 14.0 million shares so far in 2020 for well over half a billion dollars. We have also increased our quarterly dividend twice this year, doubling it in Q1 2020 and recently announcing a 50% increase, to US$0.1875 per share, beginning in Q4 2020,” Tony Makuch, President, and Chief Executive Officer said.