“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Atara Biotherapeutics Inc (NASDAQ:ATRA) and see how it was affected.
Atara Biotherapeutics Inc (NASDAQ:ATRA) shareholders have witnessed an increase in enthusiasm from smart money of late. ATRA was in 15 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with ATRA positions at the end of the previous quarter. Our calculations also showed that ATRA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are viewed as unimportant, outdated financial tools of years past. While there are greater than 8000 funds in operation at present, Our researchers hone in on the top tier of this group, around 750 funds. These investment experts watch over the majority of all hedge funds’ total capital, and by paying attention to their unrivaled picks, Insider Monkey has figured out a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Seth Klarman of Baupost Group
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action encompassing Atara Biotherapeutics Inc (NASDAQ:ATRA).
How have hedgies been trading Atara Biotherapeutics Inc (NASDAQ:ATRA)?
Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ATRA over the last 17 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Baupost Group held the most valuable stake in Atara Biotherapeutics Inc (NASDAQ:ATRA), which was worth $117.3 million at the end of the third quarter. On the second spot was Maverick Capital which amassed $72.1 million worth of shares. Redmile Group, Camber Capital Management, and Bridger Management 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 Bridger Management allocated the biggest weight to Atara Biotherapeutics Inc (NASDAQ:ATRA), around 3.1% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, designating 2.19 percent of its 13F equity portfolio to ATRA.
As aggregate interest increased, key hedge funds were breaking ground themselves. Great Point Partners, managed by Jeffrey Jay and David Kroin, established the biggest position in Atara Biotherapeutics Inc (NASDAQ:ATRA). Great Point Partners had $7.1 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.9 million position during the quarter. The other funds with brand new ATRA positions are Peter Muller’s PDT Partners, Minhua Zhang’s Weld Capital Management, and Cliff Asness’s AQR Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Atara Biotherapeutics Inc (NASDAQ:ATRA). We will take a look at Berry Petroleum Corporation (NASDAQ:BRY), Community Trust Bancorp, Inc. (NASDAQ:CTBI), Anika Therapeutics, Inc. (NASDAQ:ANIK), and Monarch Casino & Resort, Inc. (NASDAQ:MCRI). This group of stocks’ market valuations resemble ATRA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRY | 18 | 166597 | 0 |
| CTBI | 7 | 17795 | 1 |
| ANIK | 17 | 94464 | 1 |
| MCRI | 11 | 117028 | 3 |
| Average | 13.25 | 98971 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $358 million in ATRA’s case. Berry Petroleum Corporation (NASDAQ:BRY) is the most popular stock in this table. On the other hand Community Trust Bancorp, Inc. (NASDAQ:CTBI) is the least popular one with only 7 bullish hedge fund positions. Atara Biotherapeutics Inc (NASDAQ:ATRA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ATRA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ATRA were disappointed as the stock returned 0.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
