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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Atai Life Sciences N.V. (NASDAQ:ATAI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Atai Life Sciences N.V. (NASDAQ:ATAI) shareholders have witnessed an increase in support from the world's most elite money managers lately. Atai Life Sciences N.V. (NASDAQ:ATAI) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistic was previously 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 3 hedge funds in our database with ATAI holdings at the end of March. Our calculations also showed that ATAI 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. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Richard Gerson of Falcon Edge Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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. Now we're going to take a peek at the key hedge fund action encompassing Atai Life Sciences N.V. (NASDAQ:ATAI).
Do Hedge Funds Think ATAI Is A Good Stock To Buy Now?
At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 567% from the previous quarter. By comparison, 1 hedge funds held shares or bullish call options in ATAI a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Atai Life Sciences N.V. (NASDAQ:ATAI) was held by Falcon Edge Capital, which reported holding $48.6 million worth of stock at the end of June. It was followed by Pura Vida Investments with a $23.2 million position. Other investors bullish on the company included Woodline Partners, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Falcon Edge Capital allocated the biggest weight to Atai Life Sciences N.V. (NASDAQ:ATAI), around 3.11% of its 13F portfolio. Element Capital Management is also relatively very bullish on the stock, earmarking 1.01 percent of its 13F equity portfolio to ATAI.
As one would reasonably expect, some big names were leading the bulls' herd. Falcon Edge Capital, managed by Richard Gerson and Navroz D. Udwadia, established the most outsized position in Atai Life Sciences N.V. (NASDAQ:ATAI). Falcon Edge Capital had $48.6 million invested in the company at the end of the quarter. Efrem Kamen's Pura Vida Investments also initiated a $23.2 million position during the quarter. The other funds with brand new ATAI positions are Michael Rockefeller and KarláKroeker's Woodline Partners, Ken Griffin's Citadel Investment Group, and Israel Englander's Millennium Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Atai Life Sciences N.V. (NASDAQ:ATAI) but similarly valued. These stocks are Cimpress plc (NASDAQ:CMPR), The Cheesecake Factory Incorporated (NASDAQ:CAKE), LendingTree, Inc (NASDAQ:TREE), AMC Networks Inc (NASDAQ:AMCX), BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), and Group 1 Automotive, Inc. (NYSE:GPI). All of these stocks' market caps match ATAI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMPR,19,344801,-2 CAKE,26,248072,8 TREE,30,346799,5 AMCX,19,252112,-3 BCRX,25,510918,3 RCKT,19,539196,-3 GPI,21,303598,-5 Average,22.7,363642,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $364 million. That figure was $142 million in ATAI's case. LendingTree, Inc (NASDAQ:TREE) is the most popular stock in this table. On the other hand Cimpress plc (NASDAQ:CMPR) is the least popular one with only 19 bullish hedge fund positions. Atai Life Sciences N.V. (NASDAQ:ATAI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ATAI is 44.5. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 1.6 percentage points. Unfortunately ATAI wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ATAI investors were disappointed as the stock returned -17.6% since the end of June (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 in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.