Hedge Funds Have Never Been This Bullish On Natera Inc (NTRA)
We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Natera Inc (NASDAQ:NTRA).
Natera Inc (NASDAQ:NTRA) was in 33 hedge funds' portfolios at the end of the fourth quarter of 2019. NTRA shareholders have witnessed an increase in support from the world's most elite money managers of late. There were 24 hedge funds in our database with NTRA holdings at the end of the previous quarter. Our calculations also showed that NTRA isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are many gauges stock traders put to use to size up publicly traded companies. Two of the most underrated gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the elite money managers can outclass the market by a healthy margin (see the details here).
[caption id="attachment_341400" align="aligncenter" width="400"]
Samuel Isaly of OrbiMed Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Keeping this in mind let's take a look at the key hedge fund action surrounding Natera Inc (NASDAQ:NTRA).
What does smart money think about Natera Inc (NASDAQ:NTRA)?
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NTRA over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Natera Inc (NASDAQ:NTRA) was held by OrbiMed Advisors, which reported holding $82.2 million worth of stock at the end of September. It was followed by Millennium Management with a $57.8 million position. Other investors bullish on the company included Bridger Management, Columbus Circle Investors, and Holocene Advisors. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Natera Inc (NASDAQ:NTRA), around 3.94% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, earmarking 3.04 percent of its 13F equity portfolio to NTRA.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Bridger Management, managed by Roberto Mignone, initiated the most valuable position in Natera Inc (NASDAQ:NTRA). Bridger Management had $42.2 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also made a $6.6 million investment in the stock during the quarter. The following funds were also among the new NTRA investors: Renaissance Technologies, Kamran Moghtaderi's Eversept Partners, and Greg Martinez's Parkman Healthcare Partners.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Natera Inc (NASDAQ:NTRA) but similarly valued. These stocks are Stitch Fix, Inc. (NASDAQ:SFIX), Allegheny Technologies Incorporated (NYSE:ATI), Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), and Monro Muffler Brake Inc (NASDAQ:MNRO). This group of stocks' market caps are closest to NTRA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFIX,28,299710,5 ATI,27,146160,5 IBA,3,43174,-1 MNRO,18,171810,1 Average,19,165214,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $165 million. That figure was $325 million in NTRA's case. Stitch Fix, Inc. (NASDAQ:SFIX) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Natera Inc (NASDAQ:NTRA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still managed to beat the market by 5.5 percentage points. Hedge funds were also right about betting on NTRA, though not to the same extent, as the stock returned -22.6% during the first quarter (through March 25th) and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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