Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Northern Dynasty Minerals Ltd. (NYSE:NAK), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is NAK a good stock to buy now? Prominent investors were in a pessimistic mood. The number of long hedge fund positions were cut by 3 lately. Northern Dynasty Minerals Ltd. (NYSE:NAK) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. Our calculations also showed that NAK isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind we’re going to analyze the new hedge fund action surrounding Northern Dynasty Minerals Ltd. (NYSE:NAK).
Hedge fund activity in Northern Dynasty Minerals Ltd. (NYSE:NAK)
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -30% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NAK over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Kopernik Global Investors was the largest shareholder of Northern Dynasty Minerals Ltd. (NYSE:NAK), with a stake worth $21.2 million reported as of the end of September. Trailing Kopernik Global Investors was GRT Capital Partners, which amassed a stake valued at $0.5 million. Two Sigma Advisors, Millennium Management, and Citadel Investment 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 Kopernik Global Investors allocated the biggest weight to Northern Dynasty Minerals Ltd. (NYSE:NAK), around 3.28% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to NAK.
Because Northern Dynasty Minerals Ltd. (NYSE:NAK) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that slashed their positions entirely in the third quarter. It’s worth mentioning that Renaissance Technologies dropped the largest position of the 750 funds tracked by Insider Monkey, comprising about $1 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $0.5 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Northern Dynasty Minerals Ltd. (NYSE:NAK) but similarly valued. These stocks are NOW Inc (NYSE:DNOW), A10 Networks Inc (NYSE:ATEN), Stoneridge, Inc. (NYSE:SRI), Transocean Ltd (NYSE:RIG), Bryn Mawr Bank Corp. (NASDAQ:BMTC), Ichor Holdings Ltd. (NASDAQ:ICHR), and MeiraGTx Holdings plc (NASDAQ:MGTX). This group of stocks’ market caps are closest to NAK’s market cap.
|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 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $22 million in NAK’s case. A10 Networks Inc (NYSE:ATEN) is the most popular stock in this table. On the other hand Stoneridge, Inc. (NYSE:SRI) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Northern Dynasty Minerals Ltd. (NYSE:NAK) is even less popular than SRI. Our overall hedge fund sentiment score for NAK is 15.1. 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. Hedge funds dodged a bullet by taking a bearish stance towards NAK. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd but managed to beat the market again by 16 percentage points. Unfortunately NAK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NAK investors were disappointed as the stock returned -65.3% since the end of the third quarter (through 12/2) 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 most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.