This Metric Says You Are Smart to Buy New Gold Inc. (USA) (NGD)

New Gold Inc. (USA) (NYSEAMEX:NGD) was in 16 hedge funds’ portfolio at the end of the first quarter of 2013. NGD shareholders have witnessed an increase in enthusiasm from smart money recently. There were 10 hedge funds in our database with NGD positions at the end of the previous quarter.

At the moment, there are tons of methods market participants can use to track stocks. Some of the most innovative are hedge fund and insider trading interest. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best fund managers can trounce the broader indices by a very impressive margin (see just how much).

Equally as beneficial, optimistic insider trading activity is another way to break down the financial markets. Obviously, there are a variety of motivations for an upper level exec to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Many empirical studies have demonstrated the valuable potential of this strategy if investors know what to do (learn more here).

With these “truths” under our belt, we’re going to take a gander at the latest action encompassing New Gold Inc. (USA) (NYSEAMEX:NGD).

How have hedgies been trading New Gold Inc. (USA) (NYSEAMEX:NGD)?

At Q1’s end, a total of 16 of the hedge funds we track were bullish in this stock, a change of 60% from one quarter earlier. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes considerably.

Of the funds we track, First Eagle Investment Management, managed by Jean-Marie Eveillard, holds the biggest position in New Gold Inc. (USA) (NYSEAMEX:NGD). First Eagle Investment Management has a $48.9 million position in the stock, comprising 0.2% of its 13F portfolio. On First Eagle Investment Management’s heels is Bristol Investment Partners, managed by Trey Reik, which held a $8.8 million position; 8.6% of its 13F portfolio is allocated to the stock. Other hedgies with similar optimism include Jorge Paulo Lemann’s 3G Capital, Steven Cohen’s SAC Capital Advisors and D. E. Shaw’s D E Shaw.

As aggregate interest increased, some big names were leading the bulls’ herd. 3G Capital, managed by Jorge Paulo Lemann, assembled the largest position in New Gold Inc. (USA) (NYSEAMEX:NGD). 3G Capital had 3.6 million invested in the company at the end of the quarter. John Thiessen’s Vertex One Asset Management also made a $1.8 million investment in the stock during the quarter. The other funds with brand new NGD positions are Ray Dalio’s Bridgewater Associates, Israel Englander’s Millennium Management, and James H. Litinsky’s JHL Capital Group.

How are insiders trading New Gold Inc. (USA) (NYSEAMEX:NGD)?

Insider purchases made by high-level executives is most useful when the company we’re looking at has seen transactions within the past 180 days. Over the last six-month time frame, New Gold Inc. (USA) (NYSEAMEX:NGD) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to New Gold Inc. (USA) (NYSEAMEX:NGD). These stocks are Eldorado Gold Corp (USA) (NYSE:EGO), Harmony Gold Mining Co. (ADR) (NYSE:HMY), Franco-Nevada Corporation (NYSE:FNV), Gold Fields Limited (ADR) (NYSE:GFI), and Royal Gold, Inc USA) (NASDAQ:RGLD). This group of stocks are in the gold industry and their market caps are similar to NGD’s market cap.

With the results demonstrated by the aforementioned studies, everyday investors must always watch hedge fund and insider trading activity, and New Gold Inc. (USA) (NYSEAMEX:NGD) is an important part of this process.

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