How do we determine whether NovaGold Resources Inc. (NYSE:NG) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
NovaGold Resources Inc. (NYSE:NG) investors should pay attention to a decrease in activity from the world's largest hedge funds recently. Our calculations also showed that NG isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the latest hedge fund action surrounding NovaGold Resources Inc. (NYSE:NG).
What have hedge funds been doing with NovaGold Resources Inc. (NYSE:NG)?
At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NG over the last 16 quarters. So, let's see 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 $130 million worth of stock at the end of March. It was followed by Empyrean Capital Partners with a $30.7 million position. Other investors bullish on the company included Kopernik Global Investors, Levin Capital Strategies, and Anchor Bolt Capital.
Due to the fact that NovaGold Resources Inc. (NYSE:NG) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers that slashed their entire stakes in the second quarter. It's worth mentioning that Louis Bacon's Moore Global Investments dropped the largest stake of all the hedgies tracked by Insider Monkey, worth about $21.1 million in stock. Brian Ashford-Russell and Tim Woolley's fund, Polar Capital, also dropped its stock, about $0.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to NovaGold Resources Inc. (NYSE:NG). These stocks are Hostess Brands, Inc. (NASDAQ:TWNK), Genworth Financial Inc (NYSE:GNW), Pretium Resources Inc (NYSE:PVG), and Bottomline Technologies (de), Inc. (NASDAQ:EPAY). This group of stocks' market values resemble NG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TWNK,26,282684,2 GNW,22,169662,-2 PVG,22,93797,1 EPAY,16,72602,1 Average,21.5,154686,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $207 million in NG's case. Hostess Brands, Inc. (NASDAQ:TWNK) is the most popular stock in this table. On the other hand Bottomline Technologies (de), Inc. (NASDAQ:EPAY) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks NovaGold Resources Inc. (NYSE:NG) is even less popular than EPAY. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on NG, though not to the same extent, as the stock returned 2.7% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.