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Should I Buy NanoString Technologies Inc (NSTG)?

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  • NSTG

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 30th, 2021. In this article we are going to take a look at smart money sentiment towards NanoString Technologies Inc (NASDAQ:NSTG).

Hedge fund interest in NanoString Technologies Inc (NASDAQ:NSTG) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that NSTG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Viper Energy Partners LP (NASDAQ:VNOM), Old National Bancorp (NASDAQ:ONB), and Brady Corp (NYSE:BRC) to gather more data points.

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.

Cathie Wood ARK Investment Management
Cathie Wood ARK Investment Management

Cathie Wood of ARK Investment Management

At Insider Monkey, we scour multiple sources to uncover 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 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. With all of this in mind let's take a look at the latest hedge fund action regarding NanoString Technologies Inc (NASDAQ:NSTG).

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

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NSTG over the last 24 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, ARK Investment Management, managed by Catherine D. Wood, holds the largest position in NanoString Technologies Inc (NASDAQ:NSTG). ARK Investment Management has a $193.6 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Marshall Wace LLP, managed by Paul Marshall and Ian Wace, which holds a $122.5 million position; 0.6% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism include Ricky Sandler's Eminence Capital, Efrem Kamen's Pura Vida Investments and Brian Ashford-Russell and Tim Woolley's Polar Capital. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to NanoString Technologies Inc (NASDAQ:NSTG), around 2.13% of its 13F portfolio. Eminence Capital is also relatively very bullish on the stock, setting aside 1.16 percent of its 13F equity portfolio to NSTG.

Judging by the fact that NanoString Technologies Inc (NASDAQ:NSTG) has faced a decline in interest from hedge fund managers, it's safe to say that there exists a select few fund managers who were dropping their entire stakes by the end of the second quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group said goodbye to the biggest position of the 750 funds tracked by Insider Monkey, totaling about $10 million in stock. Renaissance Technologies, also dropped its stock, about $4.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to NanoString Technologies Inc (NASDAQ:NSTG). We will take a look at Viper Energy Partners LP (NASDAQ:VNOM), Old National Bancorp (NASDAQ:ONB), Brady Corp (NYSE:BRC), South Jersey Industries Inc (NYSE:SJI), Axonics, Inc. (NASDAQ:AXNX), BancorpSouth Bank (NYSE:BXS), and Nova Ltd. (NASDAQ:NVMI). This group of stocks' market values resemble NSTG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VNOM,12,93531,2 ONB,15,47746,-2 BRC,15,134881,-1 SJI,14,190188,-18 AXNX,22,319335,6 BXS,18,112595,6 NVMI,18,337995,2 Average,16.3,176610,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $774 million in NSTG's case. Axonics, Inc. (NASDAQ:AXNX) 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 12 bullish hedge fund positions. Compared to these stocks NanoString Technologies Inc (NASDAQ:NSTG) is more popular among hedge funds. Our overall hedge fund sentiment score for NSTG is 83.8. 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 gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Unfortunately NSTG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NSTG were disappointed as the stock returned -27.4% since the end of the second quarter (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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