At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not InVitae Corporation (NYSE:NVTA) makes for a good investment right now.
Is NVTA stock a buy? InVitae Corporation (NYSE:NVTA) has experienced an increase in hedge fund sentiment recently. InVitae Corporation (NYSE:NVTA) was in 35 hedge funds’ portfolios at the end of December. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 24 hedge funds in our database with NVTA holdings at the end of September. Our calculations also showed that NVTA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
James E. Flynn of Deerfield Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Now we’re going to go over the new hedge fund action encompassing InVitae Corporation (NYSE:NVTA).
Do Hedge Funds Think NVTA Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 46% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NVTA over the last 22 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
More specifically, ARK Investment Management was the largest shareholder of InVitae Corporation (NYSE:NVTA), with a stake worth $1128.9 million reported as of the end of December. Trailing ARK Investment Management was Baker Bros. Advisors, which amassed a stake valued at $654.3 million. Casdin Capital, Perceptive Advisors, and Deerfield 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 Casdin Capital allocated the biggest weight to InVitae Corporation (NYSE:NVTA), around 15.23% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, designating 5.21 percent of its 13F equity portfolio to NVTA.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Perceptive Advisors, managed by Joseph Edelman, created the largest position in InVitae Corporation (NYSE:NVTA). Perceptive Advisors had $304.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $43.8 million position during the quarter. The other funds with brand new NVTA positions are John Overdeck and David Siegel’s Two Sigma Advisors, James Thomas Berylson’s Berylson Capital Partners, and Kenneth Tropin’s Graham Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as InVitae Corporation (NYSE:NVTA) but similarly valued. These stocks are Bausch Health Companies (NYSE:BHC), US Foods Holding Corp. (NYSE:USFD), Arrow Electronics, Inc. (NYSE:ARW), Allakos Inc. (NASDAQ:ALLK), argenx SE (NASDAQ:ARGX), UGI Corp (NYSE:UGI), and Under Armour Inc (NYSE:UA). This group of stocks’ market values resemble NVTA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHC | 43 | 2466124 | 3 |
| USFD | 44 | 1242823 | 3 |
| ARW | 27 | 764402 | -1 |
| ALLK | 11 | 558097 | 2 |
| ARGX | 22 | 1363063 | 0 |
| UGI | 25 | 181156 | 2 |
| UA | 47 | 1451753 | -1 |
| Average | 31.3 | 1146774 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1147 million. That figure was $3492 million in NVTA’s case. Under Armour Inc (NYSE:UA) is the most popular stock in this table. On the other hand Allakos Inc. (NASDAQ:ALLK) is the least popular one with only 11 bullish hedge fund positions. InVitae Corporation (NYSE:NVTA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NVTA is 73.3. 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. 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 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 7.9% in 2021 through April 1st and beat the market again by 0.4 percentage points. Unfortunately NVTA wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on NVTA were disappointed as the stock returned -6.3% since the end of December (through 4/1) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
