Is NG A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. What do these smart investors think about NovaGold Resources Inc. (NYSE:NG)?

Is NovaGold Resources Inc. (NYSE:NG) going to take off soon? The smart money was in a pessimistic mood. The number of long hedge fund positions were trimmed by 4 lately. NovaGold Resources Inc. (NYSE:NG) was in 19 hedge funds’ portfolios at the end of September. The all time high for this statistic is 23. Our calculations also showed that NG 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

David Iben of Kopernik Global Investors

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 15 best blue chip stocks 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. Keeping this in mind let’s take a look at the latest hedge fund action encompassing NovaGold Resources Inc. (NYSE:NG).

Do Hedge Funds Think NG Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in NG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in NovaGold Resources Inc. (NYSE:NG) was held by Paulson & Co, which reported holding $264.3 million worth of stock at the end of September. It was followed by Sprott Asset Management with a $73 million position. Other investors bullish on the company included Kopernik Global Investors, Odey Asset Management Group, and JNE Partners. In terms of the portfolio weights assigned to each position JNE Partners allocated the biggest weight to NovaGold Resources Inc. (NYSE:NG), around 22.16% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, dishing out 8.24 percent of its 13F equity portfolio to NG.

Since NovaGold Resources Inc. (NYSE:NG) has witnessed bearish sentiment from the smart money, it’s easy to see that there were a few money managers who were dropping their full holdings in the third quarter. Interestingly, Peter Muller’s PDT Partners dropped the largest stake of the 750 funds watched by Insider Monkey, comprising about $0.8 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dropped about $0.5 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as NovaGold Resources Inc. (NYSE:NG) but similarly valued. These stocks are Lattice Semiconductor Corporation (NASDAQ:LSCC), TFI International Inc. (NYSE:TFII), Gildan Activewear Inc (NYSE:GIL), CAE, Inc. (NYSE:CAE), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), FTI Consulting, Inc. (NYSE:FCN), and Curtiss-Wright Corp. (NYSE:CW). This group of stocks’ market values are similar to NG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LSCC 24 135268 5
TFII 13 116787 3
GIL 18 522441 -4
CAE 12 88171 -2
BHVN 33 751815 -9
FCN 37 388149 5
CW 26 229569 0
Average 23.3 318886 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $319 million. That figure was $466 million in NG’s case. FTI Consulting, Inc. (NYSE:FCN) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 12 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 39.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately NG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NG investors were disappointed as the stock returned -17.4% since the end of September (through 12/14) 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 in 2020.

Follow Novagold Resources Inc (NYSEMKT:NG)

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