At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Nektar Therapeutics (NASDAQ:NKTR) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Nektar Therapeutics (NASDAQ:NKTR) was in 26 hedge funds' portfolios at the end of June. The all time high for this statistics is 27. NKTR has seen an increase in activity from the world's largest hedge funds in recent months. There were 17 hedge funds in our database with NKTR positions at the end of the first quarter. Our calculations also showed that NKTR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Keeping this in mind let's view the latest hedge fund action encompassing Nektar Therapeutics (NASDAQ:NKTR).
What does smart money think about Nektar Therapeutics (NASDAQ:NKTR)?
At second quarter's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 53% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards NKTR over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Nektar Therapeutics (NASDAQ:NKTR) was held by Maverick Capital, which reported holding $120.1 million worth of stock at the end of September. It was followed by Camber Capital Management with a $69.5 million position. Other investors bullish on the company included Rhenman & Partners Asset Management, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Camber Capital Management allocated the biggest weight to Nektar Therapeutics (NASDAQ:NKTR), around 3.98% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, setting aside 2.53 percent of its 13F equity portfolio to NKTR.
As aggregate interest increased, key money managers have been driving this bullishness. GLG Partners, managed by Noam Gottesman, established the largest position in Nektar Therapeutics (NASDAQ:NKTR). GLG Partners had $3.4 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also made a $1.2 million investment in the stock during the quarter. The other funds with brand new NKTR positions are Minhua Zhang's Weld Capital Management, Michael Gelband's ExodusPoint Capital, and Jerome Pfund and Michael Sjostrom's Sectoral Asset Management.
Let's check out hedge fund activity in other stocks similar to Nektar Therapeutics (NASDAQ:NKTR). We will take a look at First Citizens BancShares Inc. (NASDAQ:FCNCA), Wingstop Inc (NASDAQ:WING), Neogen Corporation (NASDAQ:NEOG), First Financial Bankshares Inc (NASDAQ:FFIN), TriNet Group Inc (NYSE:TNET), SelectQuote, Inc. (NYSE:SLQT), and HUYA Inc. (NYSE:HUYA). This group of stocks' market valuations match NKTR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCNCA,15,112679,-2 WING,28,311031,1 NEOG,18,40479,2 FFIN,18,20741,4 TNET,21,338757,2 SLQT,29,289573,29 HUYA,21,346427,3 Average,21.4,208527,5.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $269 million in NKTR's case. SelectQuote, Inc. (NYSE:SLQT) is the most popular stock in this table. On the other hand First Citizens BancShares Inc. (NASDAQ:FCNCA) is the least popular one with only 15 bullish hedge fund positions. Nektar Therapeutics (NASDAQ:NKTR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for NKTR is 78.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately NKTR wasn't nearly as popular as these 10 stocks and hedge funds that were betting on NKTR were disappointed as the stock returned -24% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.