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Hedge Funds Never Been Less Bullish On New Gold Inc. (NGD)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtNew Gold Inc. (NYSE:NGD) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

New Gold Inc. (NYSE:NGD) was in 10 hedge funds’ portfolios at the end of the first quarter of 2020. NGD has seen a decrease in support from the world’s most elite money managers in recent months. There were 12 hedge funds in our database with NGD holdings at the end of the previous quarter. Our calculations also showed that NGD 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

RENAISSANCE TECHNOLOGIES

Jim Simons of Renaissance Technologies

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the latest hedge fund action regarding New Gold Inc. (NYSE:NGD).

What have hedge funds been doing with New Gold Inc. (NYSE:NGD)?

At Q1’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NGD over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is NGD A Good Stock To Buy?

Among these funds, Kopernik Global Investors held the most valuable stake in New Gold Inc. (NYSE:NGD), which was worth $21.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.4 million worth of shares. Two Sigma Advisors, Arrowstreet Capital, and Sprott Asset Management 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 Kopernik Global Investors allocated the biggest weight to New Gold Inc. (NYSE:NGD), around 4.67% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to NGD.

Seeing as New Gold Inc. (NYSE:NGD) has faced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their positions entirely last quarter. Intriguingly, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors sold off the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $0.3 million in stock, and George Zweig, Shane Haas and Ravi Chander’s Signition LP was right behind this move, as the fund cut about $0 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to New Gold Inc. (NYSE:NGD). We will take a look at 89bio, Inc. (NASDAQ:ETNB), Organigram Holdings Inc. (NASDAQ:OGI), Customers Bancorp Inc (NASDAQ:CUBI), and Preferred Apartment Communities Inc. (NYSE:APTS). This group of stocks’ market valuations are closest to NGD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ETNB 3 187170 -3
OGI 7 2666 2
CUBI 13 25069 -3
APTS 9 7482 0
Average 8 55597 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $35 million in NGD’s case. Customers Bancorp Inc (NASDAQ:CUBI) is the most popular stock in this table. On the other hand 89bio, Inc. (NASDAQ:ETNB) is the least popular one with only 3 bullish hedge fund positions. New Gold Inc. (NYSE:NGD) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on NGD as the stock returned 164.7% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.