Is It Worth Taking an Active Bet on Coeur Mining?



Betting on Coeur Mining

The main reason behind investing in a stock over a benchmark—for example, engaging in active investing over mere replication of a benchmark portfolio—is to earn excess returns. In the case of Renaissance Technologies, by increasing its stake in Coeur Mining (CDE) in 1Q15, it would expect Coeur Mining to generate superior returns compared to the benchmarks listed below.

As observed above, Coeur Mining underperformed its peers. So far, in 2015, it generated 6.65% returns to its shareholders. Meanwhile, Newmont Mining (NEM), Hecla Mining (HL), and Pan American Silver (PAAS) yielded returns of ~43%, 15%, and 8% respectively.

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Is the Gamble Worth it?

The previously mentioned trend doesn’t hold true when Coeur Mining is compared to ETFs with exposure to gold and silver mining stocks. ETFs like the VanEck Vectors Gold Miners Index (GDX) yielded returns of 3.47%, while the SPDR S&P Metals and Mining ETF (XME) yielded negative returns of 9.45%.

As a result, it may appear that investing in Coeur Mining is a superior strategy compared to taking a more passive stance. In comparison to its peers, its performance is lagging. However, Coeur Mining could gain from falling oil prices and the depreciation of the Mexican peso. For this reason, Renaissance Technologies’ trade doesn’t seem to be timed wrong.


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