Is Natera (NTRA) Stock A Buy or Sell?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Natera Inc (NASDAQ:NTRA) changed recently.

Is NTRA stock a buy or sell? Natera Inc (NASDAQ:NTRA) was in 46 hedge funds’ portfolios at the end of December. The all time high for this statistic is 43. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. NTRA has seen an increase in hedge fund sentiment in recent months. There were 43 hedge funds in our database with NTRA holdings at the end of September. Our calculations also showed that NTRA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ian Wace of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). Keeping this in mind we’re going to check out the key hedge fund action surrounding Natera Inc (NASDAQ:NTRA).

Do Hedge Funds Think NTRA Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in NTRA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, OrbiMed Advisors, holds the biggest position in Natera Inc (NASDAQ:NTRA). OrbiMed Advisors has a $210.1 million position in the stock, comprising 1.8% of its 13F portfolio. Sitting at the No. 2 spot is Millennium Management, led by Israel Englander, holding a $143.9 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism contain Paul Marshall and Ian Wace’s Marshall Wace LLP, Richard Driehaus’s Driehaus Capital and Roberto Mignone’s Bridger Management. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Natera Inc (NASDAQ:NTRA), around 14.73% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, setting aside 5.34 percent of its 13F equity portfolio to NTRA.

Consequently, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Natera Inc (NASDAQ:NTRA). Marshall Wace LLP had $90.7 million invested in the company at the end of the quarter. Kevin Molloy’s Iron Triangle Partners also initiated a $14.9 million position during the quarter. The other funds with new positions in the stock are Steven Boyd’s Armistice Capital, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Natera Inc (NASDAQ:NTRA). We will take a look at Iron Mountain Incorporated (NYSE:IRM), Service Corporation International (NYSE:SCI), Smartsheet Inc. (NYSE:SMAR), Ozon Holdings PLC (NASDAQ:OZON), RenaissanceRe Holdings Ltd. (NYSE:RNR), Lamar Advertising Company (REIT) (NASDAQ:LAMR), and Inphi Corporation (NASDAQ:IPHI). This group of stocks’ market values resemble NTRA’s market value.

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As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $746 million. That figure was $1175 million in NTRA’s case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand Iron Mountain Incorporated (NYSE:IRM) is the least popular one with only 18 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 88. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately NTRA wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on NTRA were disappointed as the stock returned 3.8% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.