Was The Smart Money Right About Mirati Therapeutics, Inc. (MRTX)?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Mirati Therapeutics, Inc. (NASDAQ:MRTX).

Mirati Therapeutics, Inc. (NASDAQ:MRTX) was in 55 hedge funds’ portfolios at the end of June. The all time high for this statistic is 57. MRTX has experienced a decrease in support from the world’s most elite money managers of late. There were 57 hedge funds in our database with MRTX holdings at the end of March. Our calculations also showed that MRTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Felix Baker of Baker Bros.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. 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. Keeping this in mind we’re going to take a gander at the new hedge fund action encompassing Mirati Therapeutics, Inc. (NASDAQ:MRTX).

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

At second quarter’s end, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the first quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in MRTX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, holds the largest position in Mirati Therapeutics, Inc. (NASDAQ:MRTX). Avoro Capital Advisors (venBio Select Advisor) has a $807.7 million position in the stock, comprising 14% of its 13F portfolio. Coming in second is Perceptive Advisors, led by Joseph Edelman, holding a $514.6 million position; the fund has 6.7% of its 13F portfolio invested in the stock. Other peers that are bullish comprise Julian Baker and Felix Baker’s Baker Bros. Advisors, OrbiMed Advisors and Farallon Capital. In terms of the portfolio weights assigned to each position Avoro Capital Advisors (venBio Select Advisor) allocated the biggest weight to Mirati Therapeutics, Inc. (NASDAQ:MRTX), around 14.05% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, designating 6.68 percent of its 13F equity portfolio to MRTX.

Since Mirati Therapeutics, Inc. (NASDAQ:MRTX) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers that slashed their full holdings last quarter. It’s worth mentioning that Mitchell Blutt’s Consonance Capital Management cut the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $43.7 million in stock, and Frank Fu’s CaaS Capital was right behind this move, as the fund sold off about $19.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mirati Therapeutics, Inc. (NASDAQ:MRTX) but similarly valued. These stocks are TELUS International (Cda) Inc. (NYSE:TIXT), Concentrix Corporation (NASDAQ:CNXC), National Retail Properties, Inc. (NYSE:NNN), Ovintiv Inc. (NYSE:OVV), Plains All American Pipeline, L.P. (NASDAQ:PAA), APA Corporation (NASDAQ:APA), and First Citizens BancShares Inc. (NASDAQ:FCNCA). This group of stocks’ market valuations are closest to MRTX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $2791 million in MRTX’s case. Ovintiv Inc. (NYSE:OVV) is the most popular stock in this table. On the other hand TELUS International (Cda) Inc. (NYSE:TIXT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Mirati Therapeutics, Inc. (NASDAQ:MRTX) is more popular among hedge funds. Our overall hedge fund sentiment score for MRTX is 81.9. 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 returned 26.3% in 2021 through October 29th but still managed to beat the market by 2.3 percentage points. Hedge funds were also right about betting on MRTX as the stock returned 17% since the end of June (through 10/29) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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