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Is NovaGold Resources Inc. (USA) (NG) A Good Stock To Buy?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Insider Monkey’s research director, Dr. Inan Dogan, doesn’t think gold is going to perform well in the next couple of years due to higher interest rates. However, some hedge fund managers seem to disagree as overall hedge fund sentiment in NovaGold Resources Inc. (USA) (NYSEAMEX:NG) increased lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sanderson Farms, Inc. (NASDAQ:SAFM), Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), and Qunar Cayman Islands Ltd (NASDAQ:QUNR) to gather more data points.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Countries with Highest Gold Reserves

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Now, we’re going to take a look at the key action encompassing NovaGold Resources Inc. (USA) (NYSEAMEX:NG).

How have hedgies been trading NovaGold Resources Inc. (USA) (NYSEAMEX:NG)?

Heading into the fourth quarter of 2016, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the second quarter of 2016. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

HedgeFundSentimentChart

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paulson & Co, managed by John Paulson, holds the most valuable position in NovaGold Resources Inc. (USA) (NYSEAMEX:NG). Paulson & Co has a $143.4 million position in the stock, comprising 1.6% of its 13F portfolio. The second largest stake is held by Baupost Group, managed by Seth Klarman, which holds a $53.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Robert Pitts’s Steadfast Capital Management, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management and Michael A. Price and Amos Meron’s Empyrean Capital Partners.

Now, specific money managers were breaking ground themselves. PDT Partners, a quant fund managed by Peter Muller, created the largest position in NovaGold Resources Inc. (USA) (NYSEAMEX:NG). PDT Partners had $0.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.3 million position during the quarter. The following funds were also among the new NG investors: Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NovaGold Resources Inc. (USA) (NYSEAMEX:NG) but similarly valued. These stocks are Sanderson Farms, Inc. (NASDAQ:SAFM), Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY), Qunar Cayman Islands Ltd (NASDAQ:QUNR), and NOW Inc (NYSE:DNOW). All of these stocks’ market caps are closest to NG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAFM 21 202162 4
PLAY 28 425940 1
QUNR 7 10274 0
DNOW 16 227065 -2

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $300 million in NG’s case. Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) is the most popular stock in this table. On the other hand Qunar Cayman Islands Ltd (NASDAQ:QUNR) is the least popular one with only 7 bullish hedge fund positions. NovaGold Resources Inc. (USA) (NYSEAMEX:NG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PLAY might be a better candidate to consider a long position.

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