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 (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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) at the end of the second quarter and determine whether the smart money was really smart about this stock.
NovaGold Resources Inc. (NYSE:NG) shareholders have witnessed an increase in hedge fund sentiment of late. NovaGold Resources Inc. (NYSE:NG) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that NG isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
In the 21st century investor’s toolkit there are many indicators stock traders can use to appraise publicly traded companies. A couple of the most underrated indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can trounce their index-focused peers by a superb amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers after its stock price crashed. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a gander at the new hedge fund action surrounding NovaGold Resources Inc. (NYSE:NG).
How are hedge funds trading NovaGold Resources Inc. (NYSE:NG)?
At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NG over the last 20 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Paulson & Co held the most valuable stake in NovaGold Resources Inc. (NYSE:NG), which was worth $204 million at the end of the third quarter. On the second spot was Sprott Asset Management which amassed $28.6 million worth of shares. JNE Partners, Empyrean Capital Partners, and Odey Asset Management Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position JNE Partners allocated the biggest weight to NovaGold Resources Inc. (NYSE:NG), around 34.95% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, designating 6.52 percent of its 13F equity portfolio to NG.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Sprott Asset Management, managed by Eric Sprott, created the most valuable position in NovaGold Resources Inc. (NYSE:NG). Sprott Asset Management had $28.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $20.6 million position during the quarter. The following funds were also among the new NG investors: Renaissance Technologies, Peter Muller’s PDT Partners, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s check out hedge fund activity in other stocks similar to NovaGold Resources Inc. (NYSE:NG). These stocks are UFP Industries, Inc. (NASDAQ:UFPI), Synovus Financial Corp. (NYSE:SNV), J2 Global Inc (NASDAQ:JCOM), Sprouts Farmers Market Inc (NASDAQ:SFM), Omnicell, Inc. (NASDAQ:OMCL), Werner Enterprises, Inc. (NASDAQ:WERN), and KB Home (NYSE:KBH). This group of stocks’ market values resemble NG’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $376 million in NG’s case. Werner Enterprises, Inc. (NASDAQ:WERN) is the most popular stock in this table. On the other hand Omnicell, Inc. (NASDAQ:OMCL) is the least popular one with only 16 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. Our overall hedge fund sentiment score for NG is 60.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. A small number of hedge funds were also right about betting on NG as the stock returned 29.5% in the third quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.