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Hedge Funds Are Dumping NovaGold Resources Inc. (USA) (NYSEAMEX:NG)

Is NovaGold Resources Inc. (USA) (NYSEAMEX:NG) undervalued? The best stock pickers are getting less optimistic. The number of bullish hedge fund positions fell by 4 lately.

NovaGold Resources Inc. (USA) (NYSEAMEX:NG)

In the eyes of most investors, hedge funds are seen as unimportant, old financial vehicles of the past. While there are greater than 8000 funds in operation at present, we choose to focus on the elite of this group, around 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total capital, and by paying attention to their best stock picks, we have unsheathed a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (see the details here).

Just as key, positive insider trading activity is another way to parse down the world of equities. There are a number of incentives for a corporate insider to cut shares of his or her company, but just one, very simple reason why they would initiate a purchase. Plenty of academic studies have demonstrated the valuable potential of this method if “monkeys” understand what to do (learn more here).

Consequently, it’s important to take a look at the recent action surrounding NovaGold Resources Inc. (USA) (NYSEAMEX:NG).

What does the smart money think about NovaGold Resources Inc. (USA) (NYSEAMEX:NG)?

Heading into 2013, a total of 14 of the hedge funds we track were long in this stock, a change of -22% from one quarter earlier. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes meaningfully.

According to our comprehensive database, Paulson & Co, managed by John Paulson, holds the most valuable position in NovaGold Resources Inc. (USA) (NYSEAMEX:NG). Paulson & Co has a $163 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Seth Klarman of Baupost Group, with a $98 million position; 0% of its 13F portfolio is allocated to the company. Some other hedge funds that are bullish include Jeffrey Vinik’s Vinik Asset Management, Jim Simons’s Renaissance Technologies and Michael Kaufman’s MAK Capital One.

Since NovaGold Resources Inc. (USA) (NYSEAMEX:NG) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that elected to cut their full holdings in Q4. It’s worth mentioning that Peter J. Eichler Jr.’s Aletheia Research and Management cut the biggest stake of the 450+ funds we key on, totaling about $24 million in stock.. Curtis Schenker and Craig Effron’s fund, Scoggin, also sold off its stock, about $3 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds in Q4.

Insider trading activity in NovaGold Resources Inc. (USA) (NYSEAMEX:NG)

Bullish insider trading is at its handiest when the company in question has experienced transactions within the past six months. Over the latest half-year time period, NovaGold Resources Inc. (USA) (NYSEAMEX:NG) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

With the results demonstrated by Insider Monkey’s tactics, everyday investors should always watch hedge fund and insider trading sentiment, and NovaGold Resources Inc. (USA) (NYSEAMEX:NG) is no exception.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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