Bearish Hedge Fund Sprott Makes Big Bets on Miners

Sep.03, 2008 in Market Outlook, U.S Hot Stocks

By the tickerspy.com Staff

2008’s bewildering market has even been tough for at least one high-profile bear.
Considering the bleak outlook for many developed economies, it’s no surprise that Canadian money manager Sprott Asset Management, wielding a negative view of the global economy, saw this year as the right time to make its Toronto stock market debut. Founder Eric Sprott has been a vocal bear for quite some time, and on the recent quarterly conference call — Sprott’s first as a public company — he told analysts that the firm holds about C$1.5 billion in various short positions.

But it’s the firm’s exposure to commodities that may be weighing on it in recent weeks, as Sprott’s U.S.-listed equity holdings are heavy into commodities and those sectors have fallen steeply from their highs. Sprott’s Canadian debut has also proven underwhelming thus far. The stock slid lower on its first trading day and has so far not managed to close above its C$10 offering price.

IPO woes aside, Eric Sprott has been a shrewd money manager. The firm’s flagship fund has returned 30% annually in the past five years, according to Bloomberg. While Sprott, which oversees several mutual funds and hedge funds, has exposure to many Canadian-listed firms, American investors may be interested in the various U.S.-listed equities it holds, many of them mining stocks.

By far, the largest U.S.-listed position in Sprott’s portfolio is coal stock James River Coal (Nasdaq: JRCC - News), which Sprott was adding to during Q2.

Elsewhere, Sprott added stakes in gold miners New Gold (AMEX: NGD - News), Yamana Gold (NYSE: AUY - News), and Kinross Gold (NYSE: KGC - News), while trimming stakes in gold miners Golden Star Resources (AMEX: GSS - News) and Seabridge Gold (AMEX: SA - News). Sprott also opened a new stake in oil and natural gas exploration and production company GMX Resources (Nasdaq: GMXR - News) during the quarter.

North of the border, one of Sprott’s recent high-fliers has been Timminco, a silicon maker closely tied to the solar boom, whose Toronto-listed stock has soared about 130% over the last year. Some market watchers had highlighted Timminco’s volatility and Sprott’s large exposure to it as a risk heading into Sprott’s IPO, and indeed the stock has pulled back considerably from its highs in late 2007.

http://biz.yahoo.com/indie/080903/1401_id.html?.v=1

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