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Hedge Funds Have Never Been This Bullish On Natera Inc (NTRA)

Abigail Fisher

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Natera Inc (NASDAQ:NTRA) from the perspective of those elite funds.

Natera Inc (NASDAQ:NTRA) shareholders have witnessed an increase in activity from the world's largest hedge funds in recent months. NTRA was in 22 hedge funds' portfolios at the end of the third quarter of 2019. There were 20 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 Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are a multitude of signals shareholders employ to value stocks. A duo of the less known signals are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outperform their index-focused peers by a significant amount (see the details here).

[caption id="attachment_341400" align="aligncenter" width="600"] Samuel Isaly of OrbiMed Advisors[/caption]

Samuel Isaly Orbimed Advisors

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's check out the key hedge fund action regarding Natera Inc (NASDAQ:NTRA).

How are hedge funds trading Natera Inc (NASDAQ:NTRA)?

At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NTRA over the last 17 quarters. With the smart money's capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Samuel Isaly's OrbiMed Advisors has the largest position in Natera Inc (NASDAQ:NTRA), worth close to $98.4 million, accounting for 1.9% of its total 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which holds a $71.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions include Richard Driehaus's Driehaus Capital, Brandon Haley's Holocene Advisors and Principal Global Investors's Columbus Circle Investors. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Natera Inc (NASDAQ:NTRA), around 3.59% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, setting aside 1.87 percent of its 13F equity portfolio to NTRA.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Holocene Advisors, managed by Brandon Haley, assembled the most outsized position in Natera Inc (NASDAQ:NTRA). Holocene Advisors had $17.2 million invested in the company at the end of the quarter. Principal Global Investors's Columbus Circle Investors also made a $12.5 million investment in the stock during the quarter. The following funds were also among the new NTRA investors: Joel Greenblatt's Gotham Asset Management, Noam Gottesman's GLG Partners, and Ken Griffin's Citadel Investment Group.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Natera Inc (NASDAQ:NTRA) but similarly valued. These stocks are Seaspan Corporation (NYSE:SSW), ExlService Holdings, Inc. (NASDAQ:EXLS), Tenet Healthcare Corp (NYSE:THC), and Kinsale Capital Group, Inc. (NASDAQ:KNSL). This group of stocks' market valuations are similar to NTRA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSW,12,855040,5 EXLS,14,48976,3 THC,25,742996,-5 KNSL,11,50852,2 Average,15.5,424466,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $424 million. That figure was $270 million in NTRA's case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand Kinsale Capital Group, Inc. (NASDAQ:KNSL) is the least popular one with only 11 bullish hedge fund positions. Natera Inc (NASDAQ:NTRA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on NTRA as the stock returned 11.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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