“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards New Gold Inc. (NYSEAMEX:NGD).
New Gold Inc. (NYSEAMEX:NGD) investors should pay attention to a decrease in hedge fund interest lately. Our calculations also showed that NGD isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the recent hedge fund action surrounding New Gold Inc. (NYSEAMEX:NGD).
Hedge fund activity in New Gold Inc. (NYSEAMEX:NGD)
Heading into the second quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2018. On the other hand, there were a total of 14 hedge funds with a bullish position in NGD a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, Kopernik Global Investors held the most valuable stake in New Gold Inc. (NYSEAMEX:NGD), which was worth $32.6 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $8.2 million worth of shares. Moreover, Saba Capital, Arrowstreet Capital, and Marshall Wace LLP were also bullish on New Gold Inc. (NYSEAMEX:NGD), allocating a large percentage of their portfolios to this stock.
Due to the fact that New Gold Inc. (NYSEAMEX:NGD) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of funds that elected to cut their positions entirely in the third quarter. Intriguingly, Murray Stahl’s Horizon Asset Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $0.7 million in stock. Michael A. Price and Amos Meron’s fund, Empyrean Capital Partners, also cut its stock, about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to New Gold Inc. (NYSEAMEX:NGD). We will take a look at Star Group, L.P. (NYSE:SGU), Pareteum Corporation (NASDAQ:TEUM), Agilysys, Inc. (NASDAQ:AGYS), and Briggs & Stratton Corporation (NYSE:BGG). This group of stocks’ market caps resemble NGD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGU | 8 | 99694 | 0 |
| TEUM | 9 | 17634 | 2 |
| AGYS | 14 | 121010 | 1 |
| BGG | 7 | 8385 | -3 |
| Average | 9.5 | 61681 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $48 million in NGD’s case. Agilysys, Inc. (NASDAQ:AGYS) is the most popular stock in this table. On the other hand Briggs & Stratton Corporation (NYSE:BGG) is the least popular one with only 7 bullish hedge fund positions. New Gold Inc. (NYSEAMEX:NGD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately NGD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NGD were disappointed as the stock returned -22.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
