We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Nektar Therapeutics (NASDAQ:NKTR) based on that data.
Is Nektar Therapeutics (NASDAQ:NKTR) an attractive investment right now? Hedge funds are buying. The number of bullish hedge fund positions rose by 7 lately. Our calculations also showed that NKTR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). NKTR was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 19 hedge funds in our database with NKTR positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Stanley Druckenmiller of Duquesne Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the latest hedge fund action surrounding Nektar Therapeutics (NASDAQ:NKTR).
How are hedge funds trading Nektar Therapeutics (NASDAQ:NKTR)?
Heading into the first quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 37% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NKTR over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Camber Capital Management held the most valuable stake in Nektar Therapeutics (NASDAQ:NKTR), which was worth $80.9 million at the end of the third quarter. On the second spot was Maverick Capital which amassed $70 million worth of shares. Millennium Management, PDT Partners, and Duquesne Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Nektar Therapeutics (NASDAQ:NKTR), around 4.12% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, dishing out 1.02 percent of its 13F equity portfolio to NKTR.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Nektar Therapeutics (NASDAQ:NKTR) headfirst. Maverick Capital, managed by Lee Ainslie, created the most valuable position in Nektar Therapeutics (NASDAQ:NKTR). Maverick Capital had $70 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also initiated a $6.7 million position during the quarter. The other funds with brand new NKTR positions are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks similar to Nektar Therapeutics (NASDAQ:NKTR). We will take a look at Axsome Therapeutics, Inc. (NASDAQ:AXSM), Viper Energy Partners LP (NASDAQ:VNOM), First Hawaiian, Inc. (NASDAQ:FHB), and Eagle Materials, Inc. (NYSE:EXP). This group of stocks’ market caps match NKTR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AXSM | 25 | 576913 | 9 |
| VNOM | 16 | 102830 | 1 |
| FHB | 18 | 170316 | -2 |
| EXP | 38 | 537210 | -2 |
| Average | 24.25 | 346817 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $347 million. That figure was $230 million in NKTR’s case. Eagle Materials, Inc. (NYSE:EXP) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 16 bullish hedge fund positions. Nektar Therapeutics (NASDAQ:NKTR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on NKTR, though not to the same extent, as the stock returned -21.6% during the first two and a half months of 2020 (through March 25th) and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
