We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Natera Inc (NASDAQ:NTRA) and determine whether hedge funds skillfully traded this stock.
Natera Inc (NASDAQ:NTRA) was in 50 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 52. NTRA has seen a decrease in enthusiasm from smart money in recent months. There were 52 hedge funds in our database with NTRA holdings at the end of June. Our calculations also showed that NTRA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to view the fresh hedge fund action surrounding Natera Inc (NASDAQ:NTRA).
Andre Perold of HighVista Strategies
Do Hedge Funds Think NTRA Is A Good Stock To Buy Now?
At the end of September, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter of 2021. By comparison, 43 hedge funds held shares or bullish call options in NTRA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Natera Inc (NASDAQ:NTRA) was held by OrbiMed Advisors, which reported holding $175.3 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $151.5 million position. Other investors bullish on the company included Farallon Capital, Millennium Management, and Sculptor Capital. In terms of the portfolio weights assigned to each position Bridger Management allocated the biggest weight to Natera Inc (NASDAQ:NTRA), around 5.13% of its 13F portfolio. Hudson Executive Capital is also relatively very bullish on the stock, designating 4.62 percent of its 13F equity portfolio to NTRA.
Seeing as Natera Inc (NASDAQ:NTRA) has experienced declining sentiment from the smart money, logic holds that there were a few hedge funds who sold off their entire stakes last quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, worth about $27.3 million in stock, and Jim Tananbaum’s Foresite Capital was right behind this move, as the fund cut about $14.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Natera Inc (NASDAQ:NTRA). These stocks are The Toro Company (NYSE:TTC), Vereit Inc (NYSE:VER), Carlisle Companies, Inc. (NYSE:CSL), BorgWarner Inc. (NYSE:BWA), Pegasystems Inc. (NASDAQ:PEGA), IAC/InterActiveCorp (NASDAQ:IAC), and Aegon N.V. (NYSE:AEG). This group of stocks’ market caps resemble NTRA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTC | 29 | 894310 | -3 |
| VER | 22 | 946495 | 0 |
| CSL | 14 | 89365 | -3 |
| BWA | 21 | 170260 | -6 |
| PEGA | 25 | 1891439 | -2 |
| IAC | 47 | 1426626 | -3 |
| AEG | 5 | 12525 | -1 |
| Average | 23.3 | 775860 | -2.6 |
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 $776 million. That figure was $1800 million in NTRA’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Natera Inc (NASDAQ:NTRA) is more popular among hedge funds. Our overall hedge fund sentiment score for NTRA is 81.8. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, NTRA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on NTRA were disappointed as the stock returned -36.6% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
Follow Natera Inc. (NASDAQ:NTRA)
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Disclosure: None. This article was originally published at Insider Monkey.
