Could NovaGold Resources Inc.'s (TSE:NG) Investor Composition Influence The Stock Price?

By
Simply Wall St
Published
June 16, 2020

If you want to know who really controls NovaGold Resources Inc. (TSE:NG), then you'll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

NovaGold Resources isn't enormous, but it's not particularly small either. It has a market capitalization of CA$3.8b, which means it would generally expect to see some institutions on the share registry. In the chart below, we can see that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about NovaGold Resources.

View our latest analysis for NovaGold Resources

TSX:NG Ownership Summary June 16th 2020

What Does The Institutional Ownership Tell Us About NovaGold Resources?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that NovaGold Resources does have institutional investors; and they hold 42% of the stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see NovaGold Resources's historic earnings and revenue, below, but keep in mind there's always more to the story.

TSX:NG Income Statement June 16th 2020

Our data indicates that hedge funds own 7.7% of NovaGold Resources. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Electrum Strategic Holdings, L.L.C. is currently the company's largest shareholder with 24% of shares outstanding. The second and third largest shareholders are Paulson & Co. Inc. and FMR LLC, holding 7.7% and 7.5%, respectively.

We also observed that the top 7 shareholders account for 52% of the register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of NovaGold Resources

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in NovaGold Resources Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around CA$46m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public holds a 24% stake in NG. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 26%, of the NG stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand NovaGold Resources better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for NovaGold Resources you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.

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