At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards NovaGold Resources Inc. (NYSE:NG).
NovaGold Resources Inc. (NYSE:NG) investors should be aware of an increase in enthusiasm from smart money of late. NG was in 19 hedge funds’ portfolios at the end of the first quarter of 2020. There were 16 hedge funds in our database with NG holdings at the end of the previous quarter. Our calculations also showed that NG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are numerous formulas market participants have at their disposal to size up stocks. Two of the most innovative formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the elite fund managers can trounce the broader indices by a superb margin (see the details here).
John Paulson of Paulson & Co
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the key hedge fund action surrounding NovaGold Resources Inc. (NYSE:NG).
How have hedgies been trading NovaGold Resources Inc. (NYSE:NG)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NG over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in NovaGold Resources Inc. (NYSE:NG) was held by Paulson & Co, which reported holding $186.2 million worth of stock at the end of September. It was followed by Empyrean Capital Partners with a $33.5 million position. Other investors bullish on the company included JNE Partners, Kopernik Global Investors, and RIT Capital Partners. In terms of the portfolio weights assigned to each position JNE Partners allocated the biggest weight to NovaGold Resources Inc. (NYSE:NG), around 23.25% of its 13F portfolio. RIT Capital Partners is also relatively very bullish on the stock, dishing out 7.33 percent of its 13F equity portfolio to NG.
As aggregate interest increased, key hedge funds have been driving this bullishness. RIT Capital Partners, managed by Jacob Rothschild, created the largest position in NovaGold Resources Inc. (NYSE:NG). RIT Capital Partners had $9.9 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $1.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Charles Paquelet’s Skylands Capital, Mika Toikka’s AlphaCrest Capital Management, and Michael Gelband’s ExodusPoint Capital.
Let’s check out hedge fund activity in other stocks similar to NovaGold Resources Inc. (NYSE:NG). These stocks are Corelogic Inc (NYSE:CLGX), Brady Corp (NYSE:BRC), Nordstrom, Inc. (NYSE:JWN), and F.N.B. Corp (NYSE:FNB). This group of stocks’ market valuations are closest to NG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLGX | 31 | 253322 | 3 |
| BRC | 10 | 140433 | -5 |
| JWN | 25 | 72883 | -5 |
| FNB | 24 | 63920 | 1 |
| Average | 22.5 | 132640 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $297 million in NG’s case. Corelogic Inc (NYSE:CLGX) is the most popular stock in this table. On the other hand Brady Corp (NYSE:BRC) is the least popular one with only 10 bullish hedge fund positions. NovaGold Resources Inc. (NYSE:NG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately NG wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NG investors were disappointed as the stock returned 18.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Novagold Resources Inc (NYSEMKT:NG)
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Disclosure: None. This article was originally published at Insider Monkey.
