NovaGold Resources Inc.'s (TSE:NG) latest 4.2% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Institutions' substantial holdings in NovaGold Resources implies that they have significant influence over the company's share price
• 54% of the business is held by the top 6 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in NovaGold Resources Inc. (TSE:NG) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 49% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to CA$1.7b last week after a 4.2% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 2.1% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in NovaGold Resources' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of NovaGold Resources, beginning with the chart below.

See our latest analysis for NovaGold Resources

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.

As you can see, institutional investors have a fair amount of stake in NovaGold Resources. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of NovaGold Resources, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 8.1% 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. Our data shows that Electrum Strategic Holdings, L.L.C. is the largest shareholder with 24% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.1% and 6.4%, of the shares outstanding, respectively. Additionally, the company's CEO Gregory Lang directly holds 0.6% of the total shares outstanding.

We did some more digging and found that 6 of the top shareholders account for roughly 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own 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$18m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 16% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

It seems that Private Companies own 25%, of the NovaGold Resources 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 4 warning signs we've spotted with NovaGold Resources (including 3 which are significant) .

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.